A new report by Unison forecasts that it will take two years for home prices to recover from the effects of COVID-19.
Unison gave numerous reasons as to why the industry is in a better position to survive an economic depression when compared to the Great Recession more than a decade ago. The report said the industry is more prepared due to the current presence of more government support available to aid homeowners in particular versus in the past.
The report also offered additional insights into what the industry can expect moving forward, including the claim that regarding industry supply and demand, the amount of housing available for sale will be limited in the near future, while demand will remain steady and strong.
One possible reason given for this, according to the report, is that homeowners will be more likely to sell their stocks and bonds to stay afloat post-crisis, versus selling their homes, which would require moving their families.
Additionally, rate cuts by the Federal Reserve have caused mortgage rates to plummet to record lows, an occurrence that could provide potential home buyers with a small boost to get their foot in the door—and real offers on the table—once the market recovers.
Yet, the report warns that this recovery will not be uniform across the nation, but instead, will rely more upon regions and individual factors affecting each region. For instance, those regions particularly dependent on travel, entertainment, and oil and gas, which includes Las Vegas; Orlando; New Orleans; Honolulu; and Oklahoma City, as these areas have been hit especially hard by the current crisis.
Home prices before COVID-19’s spread continued their upward trajectory, as CoreLogic’s Home Price Index (HPI) revealed that home prices rose 4.1% annually in February. This represents an increase from February 2019’s gain of 4%.
The HPI has increased on a year-over-year basis every month since February 2012 and has gained 63.6% since March 2011.
The overall HPI was 10.1% higher than its pre-crisis peak in April 2006.
Homes in the lowest-price tier rose 6% annually in February, compared to 5.2% for the middle-price tier. The middle-to-moderate price tier saw home prices rise 4.5% and 3.6% for the high-price tier.