April 2020 Housing Market Outlook
April 2020 Housing Market Forecast
Posted April 02, 2020
The global COVID-19 pandemic has created enormous uncertainty around the world. Health concerns are growing, global markets remain volatile and millions of people are facing unemployment. This is uncharted territory. And as you can imagine, we've had a lot of questions from customers, employees and investors about the implications for both our business and the economy. There is also a healthy debate surrounding how an impending recession will affect the housing market.
First and foremost, Huuzzer remains on good financial footing, coming off a Series A funding round in February. With a strong balance sheet, we still intend to grow year over year through this market condition. Second, we believe that all market views should be rooted in and informed by sound data. Recognizing these unprecedented times, below you can see our market forecasts and predictions about the future for the housing market in our current areas and beyond.
By the end of February 2020, all Hozer markets were in extreme seller market conditions with approximately 2.0 months of inventory in Philadelphia - NJ and 0.9 months of inventory in DC / MD / VA. Both of these metrics were all-time highs. Although we do not yet have complete data for March 2020, preliminary data suggests that this data once again hits a new all-time low in March
February 18 to February 20 PHL market stock drop. The DC and BAL markets have a similar seasonal shape and long-term trend.
For this reason, there is no reason to believe that when the world emerges from the COVID-19 crisis, market conditions will be any different. In our lead funnel, we've seen seller interest drop significantly while buyer interest remains steady. In addition, there is a national increase in refinancing at record low rates, which suggests that there is more desire to tap equity through refinancing rather than selling the home right now. The main driver of this trend is the yield on the 10-year Treasury note (the main leading indicator of future mortgage rates) which is at a sustained all-time low.
The fed funds rate is at zero and the only interest rate lever left at the Fed is to go negative as other countries have done. The Fed's latest dramatic cut to zero is intended to boost asset prices in a falling stock market, but it will also affect the level of still-hot home prices when trading resumes as normal. Most of the quantitative data we have suggests that the seller's market will continue to become more and more extreme.
Basically, there are some strong anecdotal reasons to believe that there is a hidden "shadow stock" of listings that prudently did not hit the market during the crisis that could be hit all at once as conditions return to normal. In addition, we believe that there will be forced sellers due to the huge increase in unemployment and the vacant Airbnb inventory. Even before the pandemic, we also observed an easing of foreclosure activity in certain areas that may now be steadily growing. All of these early signs point to a possible momentum shift and a potential trend for stock growth. Even if this momentum shift occurs, it will take a significant amount of time to change the nature of the housing market given the significant demand from buyers that continues to exist.
Even assuming there is a full-blown economic depression, it's still probably not enough to move the needle quickly to a buyer's market. In our markets, we have to add 6-9 months of inventory (400-1000% growth from the February number and maybe even more than the March number) to suddenly move into even a moderate buyer's market. There is no historical precedent for this type of change in registration inventory in a short period of time. Even in the subprime crisis of the late 00's (which unlike this crisis affected housing more than any other sector because housing was the cause of the crisis) the full transition from a record seller's market to a record buyer's market took 3 to 4 years to play out (during which there was a balanced market of 1- 2 years) before moving back to the familiar market we are in today (which took the better part of a decade).
We are currently at unprecedented levels of low inventory, which is considered an extreme selling market. A balanced market is considered a 6-8 month supply Absorption of 13-17%.) A buyer's market is considered to be 8 months supply (<13% absorption) and a seller's market is considered to be <6 months supply (absorption of 17%.)
Given how volatile and uncertain the current situation is, it is difficult to be overly confident in this view, and we must be prepared for anything to happen in the short term. However, all the data and historical precedents that we have indicate a continuation of the seller's market conditions before the crisis or the beginning of a trend towards a buyer's market that unfolds in the coming quarters and years.
Time will tell how everything turns out. The only thing you can count on is that Creator was built to change the real estate industry forever. In times like these, we have the ability to help homeowners save when they sell and feel confident about buying. And our W2 real estate agents have the convenience of a salary unlike so many agents. Many other independent contractors. Enduring companies find a way to not only survive, but thrive, in the face of adversity. We undertake to update with more preventive information content in the coming weeks and months.
Mike Maher, Creative Director
April 2020 Housing Market Outlook
Houwzer's current data-based market outlook and predictions for what the future holds for the housing market in our current regions and beyond.
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