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What’s In Store for the Real Estate Market During the Summer of 2020

The great American philosopher Yogi Berra, who also happened to be one of the best baseball players of all time, once said “it’s tough to make predictions, especially about the future.”

About four month ago, 2020 was looking to be one of the strongest real estate years in recent memory, quite possibly the strongest since the recession that started in 2008, and perhaps one of the best years since the post-war economic boom of the 1950’s.

But we all know what happened. Along came the coronavirus, COVID-19, quarantines, layoffs, and shelter-in-place orders. Tens of thousands of Americans lost their lives while millions lost their jobs.

The glowing sunrise that was early 2020 turned cloudy in a hurry. But now we are, as a country, in the early stages of recovery. Cities and states are slowly lifting shelter and lockdown orders, while businesses are steadily reopening their doors. There is a long road to travel, but we are on the path to recovery.

So what does that mean for the real estate market? What will the summer of 2020 look like for the real estate buyer, borrower, and seller?

While Mr. Berra was certainly accurate about predictions, we can still make a few educated guesses in an attempt to see what the future holds.

Summer of 2020: What to Expect from Real Estate, Mortgage, and More

Most Expecting a Rebound, Some Expecting a Boom

The biggest question orbits around the expected overall economic recovery, which will play a direct role in the economic rebound of the real estate market. Assuming the country reopens, people are allowed to work, and businesses can start offering services again, there will be a growth in economic activity, which means a growth in real estate transaction.

If economic activity continues to stabilize and accelerate, it seems perfectly reasonable to assume that more buyers and sellers will be active in the summer. It’s even possible that this economic activity could lead to a real estate boom, as financial stability gives millions of buyers the chance to unleash their pent-up demand for homeownership.

Busy Spring Season Shifting to Late Summer, Possibly Fall

During a “normal” year (whatever that means), the spring is a high-activity season for real estate sales. Agents, lenders, buyers, and sellers are like a hive of activity starting around mid-March and going until late June of early July. Once the height of summer comes along, things start to be less hectic for people in the real estate industry.

For the summer of 2020, however, this trend could shift; it seems likely that the high-pace of spring will shift to late summer and could possibly be pushed into the fall.

Interest Rates Likely Staying Low

If anything is certain, it’s the likelihood that interest rates will remain low. Whether we see a second coronavirus wave, leading to a second lockdown, or a complete recovery, it’s all but certain that interest rates remain low. To explain, let’s look at the two extreme-end scenarios that could occur during the summer of 2020:

Scenario 1: Second Wave Leads to Second Lockdown

If a massive second wave of coronavirus cases were to occur, causing governments to reinstate lockdowns that lead to a second economic fall, interest rates would remain low in an attempt to stimulate economic activity wherever and whenever possible.

Scenario 2: Economic Recovery Launches Like a Rocket

At the other end, it’s also possible that pent-up economic demand leads to a rapid economic recovery, creating momentum that takes employment, wage growth, and stock prices to levels never seen before. Conventional wisdom holds that when economic growth is rapid, interest rates should be raised to stabilize the growth. However, Pres. Trump has shown a preference for low interest rates even during economic highs; based on his track record, it seems likely that he would repeat this trend and push for low interest rates even while the economy recovers.

So no matter where we land (likely somewhere in the middle), you can reasonably expect low interest rates through the summer of 2020.

Home Prices Likely to Stay Flat

Although there will likely be a growth in demand, it seems possible that home prices will remain steady. This is good news for buyers in markets that were experiencing rapid increases in home prices, which forced many people to purchase far from jobs and economic regions. It seems possible that housing prices could flatten to about 1% or 2% growth, which creates a stable, predictable housing market.

New home with small detached garage
If buyers remain hesitant to enter market, the summer of 2020 could see abnormally low inventory.

Inventory Could be Low

While there will likely be fewer total buyers, there is also the real chance that inventory could be low as well. In most cases, a low-inventory means high prices, as each home is competed for with aggressive offers. But in this case, it’s likely that the number of buyers will rise or fall alongside sellers; so the buyer-per-listing ratio could, possibly, remain relatively unchanged.

Mortgage Qualifications Could Tighten

With economic uncertainty, there is an inevitable tightening of mortgage qualification rules. Lenders are are more hesitant to provide financing if there is a chance for job losses and layoffs.

The most noticeable change for likely borrowers is the increase in downpayment requirements. Downpayments are a trusted way for lenders to reduce risk; so you may see more lenders requiring large downpayments, especially for already-risky loans like vacation-home loans and jumbo loans.

There could also be an increase in credit-score requirements over the summer 0f 2020, which is another way that lenders will reduce risk to their portfolio.

Common-Sense Mortgage Underwriting; Now and into the Future!

Like Yogi Berra, we won’t pretend to know the future. But by staying informed, you can be better prepared to purchase your home, sell your property, or get qualified for an affordable mortgage.

The future is uncertain, but you can count on our team for consistent service now and in the months to come. For 2020 and beyond, we’ll be ready to deliver outstanding support for your next mortgage qualification!

CONTACT SAN DIEGO PURCHASE LOANS TODAY!

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