Home Prices May Be Dropping Soon. Here?s Why.
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Market forecasters say it?s likely to happen if federal response to the pandemic wavers. Housing markets across the United States have proven incredibly resilient to the economic fallout of the coronavirus pandemic. Home sales have lagged since the outbreak of the virus in March but ? more importantly to individual buyers and sellers ? home prices have actually risen.
With the virus showing no signs of letting up, forecasters now believe that the pandemic could cause home prices to drop in 2021. The belated decline would come as a result of prolonged economic damage and rising uncertainty over the federal government?s longterm commitment to the policies that have kept housing markets afloat over the last four months. ?There?s a lot of uncertainty out there,? says Frank Nothaft, an economist with Corelogic. ?When we look at the mortgage market in particular, we have a lot of concerns that we?re going to see a spike in delinquencies and foreclosure rates as we get into 2021.?
Corelogic?s forecast predicts home prices nationally will have fallen 6.6 percent year-over-year by May 2021. A forecast by Haus shows home prices dropping between 0.5 and 2.5 percent from October 2020 to July 2021. The exact figures, however, are less important than the explanation behind the expected drop. To understand why such a late decline is expected, you first have to consider how housing markets have been functioning during the crisis so far, and the protections that have kep...
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