One of the more-accurate forecasters is predicting that home prices will start dropping:
Strong home purchase demand in the first quarter of 2020, coupled with tightening supply, has helped prop up home prices through the coronavirus (COVID-19) crisis. However, the anticipated impacts of the recession are beginning to appear across the housing market. Despite new contract signings rising year over year in May, home price growth is expected to stall in June and remain that way throughout the summer. CoreLogic HPI Forecast predicts a month-over-month price decrease of 0.1% in June and a year-over-year decline of 6.6% by May 2021.
Unlike the Great Recession, the current economic downturn is not driven by the housing market, which continues to post gains in many parts of the country. While activity up until now suggests the housing market will eventually bounce back, the forecasted decline in home prices will largely be due to elevated unemployment rates. This prediction is exacerbated by the recent spike in COVID-19 cases across the country.
Expecting prices to fall that quickly is flawed, however.
They are ignoring that for home prices to go down, we would need a load – probably a majority – of sellers who are willing to sell for less than the last guy got. In addition, it would take realtors who recognize what’s needed, and be able to properly advise their sellers on lower pricing.
It ain’t going to happen.
Listing agents only have one pitch – to berate the buyer agents into paying the seller’s price. If we ever get to the point where buyers object to the constantly-rising prices, and/or we run out of buyers altogether, then there will be a long stall before sellers and agents re-calibrate.
Recognizing that a shift in pricing is needed will be hampered by all the usual excuses.
The seller retorts of “I’m In No Rush”, “I Don’t Need to Sell”, and the classic, “I’m Not Going to Give It Away”, will be doused with coronavirus blame before any sellers – even the desperate ones – would consider selling for less than what they think they deserve.
Sales will slow first, so keep an eye on them – but it would take 1-2 years of stallout before sellers and agents start believing that they might not get their price.