Fannie Mae: Home sales will decline by 15% in 2020 due to coronavirus, but what will happen to property prices?
At the end of last year, economists expected that 2020 would be a strong year for housing. But now thanks to the coronavirus pandemic, home sales are poised to nose dive in the months ahead.
A new report from Fannie Mae FNMA, +11.11% projects that home sales will fall by nearly 15% in 2020. Driving that decline will be a downturn in existing home sales, which Fannie Mae expects will drop to an annual rate of 4.54 million units, down from 5.34 million in 2019.
Issues with both supply and demand are expected to contribute to the decline in home-buying activity. On the demand side, the rapid rise in unemployment as a result of the coronavirus pandemic and its accompanying stay-at-home orders will curtail many Americans’ ability to afford a purchase as big as a home.
Sellers don’t necessarily need to worry about lower prices if they do put their home on the market, according to Fannie Mae. Fannie Mae is still projecting the median price for an existing home to rise to $275,000 in 2020 from $272,000 last year, while the median price for a new home is expected to increase to $326,000 from $321,000.
While the downturn in sales is expected to lead to a slower pace of mortgage lending for loans used to purchase homes, refinancing is expected to remain strong throughout the year thanks to the low rate environment. Fannie Mae projects there will be $1.41 trillion in refinance loans originated in 2020, up from $1.01 trillion last year.
The good news for prospective home buyers and sellers alike is that the situation in the real-estate market is expected to improve next year, according to Fannie Mae. The mortgage giant currently expects the U.S. economy and home sales both to rebound in 2021. But that rebound is contingent on the pandemic’s trajectory.