Home Sales -50% Near-Term But Prices Stable - BofA

BofA Securities' economist Michelle Meyer said the COVID-19 pandemic will deliver a big negative shock to the housing market. They expect an adjustment lower in home sales and housing starts over the next three months. However, they believe home prices will hold relatively steady.

Meyer sees existing home sales down a cumulative 37% from the peak in February and new home sales down 51% from the January peak. Housing starts should fall a similar 57% from the peak, she added.

On prices, they forecast home prices will be pushed lower, hitting a low of -2.3% on a YOY basis in April 2021. They said the home price outlook appears tame relative to the sharp correction in sales due to three reasons:

1. "the market was well positioned heading into this recession. Inventory of existing homes was lean and builders were cautious about adding supply.
2. Lending standards have been tight with high credit scores and reasonable down payments, reducing the risk of foreclosures. Without the forced selling of foreclosures, home prices will be much more stable.
3. Government policies – most notably the forbearance programs – should keep people in their homes and avoid forced sales."

StreetInsider.com Fri, 24 Apr 2020 09:03:00 -0400