A report by Veros Real Estate Solutions forecasts the average projected appreciation rate for residential real estate in the nation’s largest 100 housing markets will increase on average 1.9 percent through the first quarter of 2021.
Veros said its Q1 2020 forecast was adjusted downward from previous forecasts due to massive unemployment and economic uncertainty across the country as a result of the COVID-19 pandemic.
“Home-price trends and forecasts certainly take a backseat to more pressing health and safety issues during this unprecedented tragedy,” Veros CEO Darius Bozorgi said in a release. “While we expect a softening of house prices in the near-term, we anticipate a rebound when the COVID-19 pandemic subsides.
“The fundamental economic principles under which housing has been operating in recent years are solid,” Bozorgi said. “Real estate prices will be poised to recover when we see employment return across the nation.”
Veros said the recession the country already may be heading into is different from the previous downturn that began in 2007. It said this potential recession is not a result of risky lending, but rather the unprecedented, rapidly evolving impact of the COVID-19 pandemic. Therefore, it said, a dramatic drop in house prices in the long-term is not forecast at this time, but only a more modest short-lived softening through the second quarter of 2020.
“Right now, we see economic variables at odds across the country,” Veros Vice President of Statistical and Economic Modeling Eric Fox said. “On one hand, we have historically low interest rates that typically stimulate demand and increased prices. On the other hand, unemployment is rising rapidly and GDP is falling quickly which normally drives house prices down.
“Finally, we have many people who have taken their homes off the market, reducing supply, and many buyers sitting on the sidelines temporarily, reducing demand,” Fox said. “This reduced demand/supply scenario isn’t really pushing prices up or down. The combination of all of these factors results in mild forecast depreciation on average for the next quarter with a return to normal appreciation rates later in the year and into 2021.”
Veros said the markets forecast to increase the most between this year’s first quarter and next year’s first quarter are primarily in Washington, Arizona, and Idaho, with one in Colorado.
The defining factor in those markets is very low housing supplies, which forces prices to increase much more rapidly than in other markets, Veros said.