- A new report released by Bank of America (BofA) predicts home prices will drop by 2% over the next year as a result of the coronavirus pandemic, and will hit bottom in April 2021.
- Prior to the pandemic, BofA had estimated that home prices would increase 4% to 5% in 2020.
- Early data from the Seattle-based brokerage, Redfin, points to a nearly nonexistent spring market.
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Home prices will drop 2% over the next year, a new report by Bank of America (BofA) predicts.
According to BofA, lower home prices will be a result of lower household incomes, with the typical household income expected to drop 2% lower than pre-pandemic forecasts. The study predicts unemployment will increase to around 16% in the second quarter of this year and average 7.9% in 2021, dragging home prices down.
Prior to the pandemic, BofA had estimated that home prices would increase 4% to 5% in 2020, but now it forecasts that home prices will drop by around 2.3% before they hit a bottom in April 2021.
While both the Payroll Protection Program and the CARES Act are expected to soften the economic blow to the housing market, BofA predicts the lower end of the market will feel the most heat as the hospitality, travel, and energy industries grapple with the economic impacts of the outbreak.
Still, BofA noted that its home price outlook is “tame” relative to the outlook for home sales, with a near 40% decline in home sales seen in coming months, and no return to normal levels until the end of 2021. Pricing will be relatively protected because it doesn’t see a high foreclosure risk and considers the market pretty well positioned, with a lean inventory available.
Early data points to a nearly nonexistent spring market
A recent report by the Seattle brokerage Redfin said nationwide home sales dropped 9.1% from February to March on a seasonally adjusted basis — marking the steepest decline Redfin has seen since it started recording data eight years ago.
In the last week of March, new listings were down 36.9% from the same time last year. And as of last week, that decline had spiked to nearly 50%, according to Redfin. In fact, of the 85 largest US metro areas that Redfin tracks, only three saw a year-over-year increase in active listings: Omaha, Nebraska, at 9.9%, Minneapolis at 5.3%, and El Paso, Texas, at 1.3%. According to Zillow, the markets that have seen the greatest slowdown in new listings since March 1 include Detroit with a 61.8% decrease, Pittsburgh with a 55.5% decrease, and New York with a 49.1% decrease.
