The real estate market took a big hit in the first half of 2020 thanks to COVID-19, but there's still time for a recovery before the end of the year.

That's according to a new report from consulting firm PwC that analyzes the state of US real estate market midway through the year. The report notes that total value of real estate deals was down nearly 50% in the first half of 2020, compared to the second half of 2019. Similarly, the total number of such deals was also down by a half. That was the weakest performance that real estate has posted in at least the past five years, the report notes. But there is reason for cautious optimism.

"While many real estate investors are on the sidelines, they still have ample capital to deploy," the report reads. "We expect to see third quarter activity roughly consistent with [the first half of 2020], but the industry could rebound by [the fourth quarter of 2020] as valuations stabilize and economic and political uncertainties are resolved."

The hospitality industry saw the largest drop off in real estate deal activity, down 77% in the first half of 2020 compared to the second half of 2019, according the report. Retail real estate deals were down 53% during that time period. But other sectors tied less directly to COVID-19 shutdown orders also saw slowdowns thus far in 2020, the researchers found. Total deal value for apartment complexes and offices were also about half the amount from the second half of 2019. The overall dearth of deals is making it difficult to gauge what's happening with real estate prices, according to the report.

Part of the overall slowdown in deals is due to tighter credit terms imposed by lenders—even though the Federal Reserve's benchmark rates is at a record low—as well as the fact that deals are coming together more slowly during the pandemic.

The report predicts that real estate deals will pick up in the latter half of 2020, in part due to investors looking for opportunities to pick up properties that are distressed in the short-term, but for which a long-term recovery is likely. Investors are also likely to be more active once the uncertainty over future trends subsides.

COVID-19 has accelerated some existing real estate trends, the report notes. There's high demand for so-called "18 hour cities," which are locations that offer both urban-core amenities such as restaurants and shopping while also maintaining the traditional benefits of suburban living. The rising popularity of digital health care solutions and e-commerce are also likely to change the footprint for medical offices and other healthcare facilities, as well as retail space.

"Over the long term, real estate can help drive fundamental changes across all industries," the report reads. "By embracing flexibility, [Environmental, Social, and Governance] progress, and fostering innovation, the industry can lead the charge that other industries will follow."