Seller’s or Buyer’s Market? It’s Up for Debate

May 28, 2020

Originally, this summer had all the makings of a very hot seller’s market. After all, home sales in May, June, and July traditionally tend to net 7% to 10% above market value, or an average of $17,000 to $25,000 more for sellers, according to ATTOM Data Solutions.

But then a pandemic hit.

“We are in uncharted territory,” Caleb Liu, a real estate investor and owner of House Simply Sold, told The Mortgage Reports. Some homeowners may be forced to sell due to economic damage caused by the pandemic, he said, which means an increased housing supply. "And when the inventory goes up, prices fall,” Liu added.

Some real estate experts believe buyers may have more leverage this summer. “The economy is still relatively strong,” said Rajeh Saadeh, a real estate attorney. “And the buyer pool this year will likely be smaller due to job and income loss. Those factors can help give buyers the advantage.”

Lower mortgage rates will also entice buyers. Nadia Evangelou, senior economist and director of forecasting for the National Association of REALTORS®, said that the monthly payment for a typical home ($280,600) drops by nearly $150 when rates fall from 4% to 3%, which has occurred over recent weeks. In some high-end markets, that drop has caused monthly payments to be reduced by nearly $600, she notes.

Buyers may have some advantages, but with a current lack of inventory and home prices staying strong, economists aren’t ruling out the potential for a seller’s market as well. “I don’t think the coronavirus will change the dynamics in the real estate market and give the upper hand to buyers,” Evangelou told The Mortgage Reports. “A market favorable to buyers can happen when there are more homes for sale than there are buyers in the marketplace. And right now, we have a housing shortage.”

A balanced housing market is considered a five- to six-month supply of homes for sale. Currently, the market has less than a four-month supply.

Also, due to the low supply, home prices are rising in many areas. Nationwide existing single-family homes for sale in March rose 8% compared to the previous year, according to data from the National Association of REALTORS®. There's less concern about foreclosures hampering home prices, too, since the government has put moratoriums in place to protect owners during the economic uncertainty from the pandemic.

Evangelou expects home prices to remain stable in the months ahead. “That’s due to the pandemic-induced reduction in inventory and less immediate concerns about foreclosures,” she said. Based on NAR consumer and real estate professional surveys, “potential buyers and sellers are indicating they may simply delay the process for a couple of months. But coming to 2021, prices are expected to rise 3% to 5% because of pent-up demand.”

Source: 
Will Sellers or Home Buyers Have the Advantage This Summer?” The Mortgage Reports (May 27, 2020)