Redfin reports that nearly one-third of homebuyers and sellers expect home prices to rise when the next recession hits—a reversal from earlier this year when 56% expected home prices to increase during the next recession.
According to the survey, 25% polled in December said home prices in their area are expected to decline during the next recession. March’s numbers represent a steep increase to 44%.
“It’s easy to become fearful when it feels like a recession is imminent, but it’s important to remember what has actually happened in past recessions,” said Redfin Chief Economist Daryl Fairweather. “Home prices declined substantially during the Great Recession, which started with a housing crash, but throughout the 2001 recession home prices actually rose due to a nascent housing bubble and a shift in investment dollars from the stock market into real estate. It’s perfectly reasonable to expect that a 2020 recession won’t stop home prices from rising, since the supply of homes for sale is so constricted and mortgage rates are at all-time lows.”
The survey found the biggest change in expectations were among those under the age of 45. Prior to the downturn, 62% said they expect home prices to increase and just 21% expected prices to drop during the next recession.
As of March, the share of homeowners in the younger age bracket that expects home prices to increase cut in half to 31%, while the share that believes price will decline more than doubled to 47%.
“Even though it’s likely that home prices may be insulated during the next recession, it’s a good idea for every homeowner to have an emergency fund in place just in case their home loses value and their income declines simultaneously,” Fairweather said. “Young homeowners who don’t yet have much in the way of savings or equity should especially be thinking through worst-case scenarios.”
However, the National Association of Realtors (NAR) revealed Friday that total existing-home sales rose 6.5% in February to 5.77 million. This is the eighth straight month over sales grew year-over-year—rising 7.2% from 2019.
“February’s sales of over 5 million homes were the strongest since February 2007,” said Lawrence Yun, NAR’s Chief Economist. “I would attribute that to the incredibly low mortgage rates and the steady release of a sizable pent-up housing demand that was built over recent years.”
The NAR reports the median-existing home price for all homes in February was $270,100, which is up 8% year-over-year from February 2019’s $250,100. February’s price increase is the 96th straight month with annual gains.
Yun said that while February’s report is encouraging, it is “not reflective of the current turmoil” due to the spread of COVID-19.
“These figures show that housing was on a positive trajectory, but the coronavirus has undoubtedly slowed buyer traffic and it is difficult to predict what short-term effects the pandemic will have on future sales,” Yun said.
Gay Cororaton, Director of Housing and Commercial Research for the NAR, said COVID-19 cases began to spread in February and there were still a lot of home search and contract closings, which will show up in March figures. He added the slowdown will likely be apparent in April.
Cororaton also added inventory and new listings will likely fall, according to the NAR's flash survey of Realtors conducted March 16-17. The report states 28% of Realtors saw a decline in available inventory.
Existing home sales climb to 13-year high, confirming further housing momentum prior to the Coronavirus outbreak. But these numbers are in the past. Buyer and seller pullback are increasingly the new norm until health fears subside.
— Odeta Kushi (@odetakushi) March 20, 2020
Holden Lewis, Home and Mortgage Expert, Nerdwallet, said home sales were "surprisingly brisk" in February but notes, "it's the last strong month we'll see for a while."
"The vigorous pace of home sales in February doesn't mean much, because it is bound to slow significantly with the March report. For months, we'll see fewer home buyers out there looking at homes, and fewer listings on the market, as sellers balk at allowing strangers into their homes," Lewis said.