Will Home Values Appreciate or Depreciate in 2020?

Looking at these maps and noting the views of the experts, I believe that home prices will be stable throughout 2020.

With the housing market staggered by the health crisis, some potential purchasers are questioning whether home values will be impacted. It is important that the price of any goods or services is mostly driven by supply and demand.  What causes pricing fluctuation is when supply and demand get out of balance; however if demand and supply both go up or down at relatively the same rate the price of most items will not have a major change.

Each month the National Association of Realtors (NAR) surveys “over 50,000 real estate practitioners about their expectations for home sales, prices and market conditions” for the REALTORS Confidence Index.

Their latest edition sheds some light on the relationship between seller traffic (supply) and buyer traffic (demand) during this pandemic.

Buyer Demand

The map below was created after asking the question: “How would you rate buyer traffic in your area?”

The darker the blue, the stronger the demand for homes is in that area. The survey shows that in 34 of the 50 U.S. states, buyer demand is now ‘strong’ and 16 of the 50 states have a ‘stable’ demand.

Seller Supply

The index also asks: “How would you rate seller traffic in your area?”

As the map above indicates, 46 states and Washington, D.C. reported ‘weak’ seller traffic, 3 states reported ‘stable’ seller traffic, and 1 state reported ‘strong’ seller traffic. This means there are far fewer homes on the market than what is needed to satisfy the needs of buyers looking for homes right now.

With demand still stronger than supply, home values should not depreciate.

What are the experts saying?

Here are the thoughts of three industry experts on the subject:

Ivy Zelman:

“We note that inventory as a percentage of households sits at the lowest level ever, something we believe will limit the overall degree of home price pressure through the year.”

Freddie Mac:

“Two forces prevent a collapse in house prices. First, as we indicated in our earlier research report, U.S. housing markets face a large supply deficit. Second, population growth and pent up household formations provide a tailwind to housing demand.”

In Summary, we believe that since inventory is at an all-time low and the fact that at the start of the year the housing market was showing signs of a supply deficit, the combination of these 2 items will prevent any large price drops in the prices of a median home in the U.S.

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