In a welcome twist to this roller-coaster year, Realtor.com’s “Weekly Recovery Report” forecasts that peak home-buying season has shifted from May, when it normally occurs, to August for 2020. Since May was right in the heart of the COVID quarantine and lockdown in most states, it only makes sense that we should see a recovery later in the year.
August, according to the report, is seeing benefits from states relaxing COVID restrictions, continued low interest rates, and lower inventory compared to last year at this time.
Housing Prices Up
In fact, many of the metrics improved from the prior year—such as 9.4% growth in median listing prices over August 2019, continuing the trend from July 2020, which experienced an average of 9.1% growth.
I’m sure many economists are scratching their heads at this kind of uptick amid economic turmoil—not to mention a 10%+ unemployment rate. Last time we had a double-digit unemployment rate, the housing market did not look anywhere near this good. However, while high demand, historically low interest rates, and limited inventory are fueling this surge for now, it might be short-lived.
Time on Market Down
The report went on to highlight great news for sellers, particularly those who need to sell quickly. Time on market is currently four days faster compared to this time last year, which was also the case in July 2020.
In addition, data show an 11% decrease in new listings over last year. It seems that despite a 9.4% increase in median listing price, sellers are hesitant to put their home on the market in uncertain times. Agents with reluctant clients and investors unsure about pulling the trigger—here’s proof listing and selling right now isn’t a bad idea. Strike while the iron is hot!
Drastic Dip in Inventory
To build on the decrease in new listings and increase in pricing, a 35% dip in inventory is creating a spike in demand for those buyers who are qualified and ready to go.
Of course, this is a double-edged sword. If prices continue to go up, current buyers might feel they will overpay for a house and put their buying plans on hold. Factor that in with increased competition from other buyers, and waiting until 2021 will look more attractive than being one of 10 offers in on every listing.
Market Recovery Holds
Recovery is regional, to be sure, and the western United States is ahead of the rest of the nation currently. The West has even beat the pre-COVID benchmarks that Realtor.com reported. See the graph below for the rest of the regions, with the Northeast not far behind. In contrast, the South and Midwest remain below pre-COVID numbers.
The top 10 ranked cities on Realtor.com’s “Metros Recovery Index” are exactly what would be expected—cities with historically strong markets well above the baseline with the top-ranked New York metro region 12 points ahead of No. 2-slotted Vegas. In positive news, 29 of the top 50 cities are above pre-COVID recovery numbers.
While June and July contracts are pushing the early August numbers in the right direction, early data showcasing COVID-19’s impact suggest it might be short-lived.
“A sustained seller comeback still hinges on back-to-school plans and extended lockdowns. The housing market will need to remain above pre-COVID levels for at least another 10 weeks to make up for the lost activity in the second quarter of the year. As we head into fall, an anticipated resurgence in COVID cases and economic aftershocks are likely to create an uphill battle for home buyers and sellers,” said Javier Vivas, director of economic research for Realtor.com.
With schools reopening, some states are currently experiencing just that—particularly in the South. It remains to be seen how the overall scheme of virus will affect market confidence and whether repeated lockdown measures will be necessary.
To top off current economic uncertainty, 2020 is also an election year. This historically impacts the housing market in the later half of the year. Typically, sales slide down, but prices stay relatively the same. According to Miller Samuel Inc., who compiled data from the last 13 election cycles, a 12.7% reduction in sales in August and September is expected, with an immediate November bounceback.
Overall, the state of the current market is seemingly positive, although Realtor.com’s report suggests an impending cool-off or freeze. I’m interested to track these numbers more closely on a weekly basis to find out where we go from here.
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