Home sales will drop as much as 60 percent this spring, though home prices should not drop more than 3 percent due to the economic downturn caused by the coronavirus, according to a housing forecast released Monday by Zillow.
Zillow Chief Economist Svenja Gudell said the recovery is expected to look like a checkmark, with transactions building at a pace of about 10 percent each month through the end of next year.
“Much uncertainty still exists, particularly with some states beginning to reopen and experts warning of a possible second wave of the coronavirus in the fall. However, housing fundamentals are strong – much more so than they were leading into the Great Recession – and that bodes well for housing in general,” Gudell said. “Despite the difficulties, we’re seeing several signs that there is still a good amount of demand for housing, and buyers, sellers and agents are growing more comfortable moving transactions forward where possible. For those who need to sell, buyers are out there, and there are ways to embrace technology and practice social distancing to ensure a safe process.”
Zillow’s forecast is based on published and proprietary macroeconomic and housing data – and centers around a baseline prediction of a 4.9 percent decrease in United States GDP in 2020 and a subsequent 5.7 percent increase in 2021. Under that scenario, the market is expected to include:
- A 2 to 3 percent drop in prices through the end of 2020, followed by a steady recovery throughout 2021.
- A rapid 50 to 60 percent decline in home sales, bottoming out this spring and recovering at a pace of about 10 percent each month through 2021.
The forecast also includes a more pessimistic scenario (25 percent likelihood), which shows a 3 to 4 percent price drop with continued weakness through all of 2021. A more optimistic scenario (5 percent likelihood) features a 1 to 2 percent dip in home prices through the middle of this year, followed by a robust recovery.