Who would have thought that housing and real estate would flourish when the economy went into a pandemic lockdown? Back in April, a NAR news release prepared the industry for a devastating spring. NAR chief economist, Lawrence Yun stated: “Home sales will decline this spring season because of unique economic and social consequences resulting from the coronavirus outbreak, but much of the activity looks to reappear later in the year…Home prices will remain stable because of a pandemic-induced reduction in inventory coupled with less immediate concerns over foreclosures.”
A NAR Economic Pulse Flash Survey, that was conducted April 5-6, indicated that agents were expecting the housing market to all but grind to a halt. The survey asked NAR members their views about the effects of the outbreak on the real estate market. members questions about how the coronavirus outbreak has impacted the residential and commercial real estate markets. 90 percent of respondents indicated a decline in buyer interest, while 80 percent of respondents described a decrease in homes listed for sale. Of course, you probably would have achieved the same result by asking anyone during the beginning of the lockdown.
And the stats confirmed what people were reporting when the economy began to shut down. Montgomery County housing stats for April indicated decreases across the board compared to the previous year: new listings decreased about 46 percent, new contracts decreased about 45 percent, and closed sales decreased about 11 percent.
But the housing market is resilient. The pandemic and lockdown would not keep away determined home buyers and renters, as activity could be seen to increase just one month later (during May). Although significantly down from the previous year, Montgomery County May stats compared to April indicated a 15 percent increase in home listings, and a 44 percent increase in new contracts!
Fast forward to September, when one month’s activity seemed to blow away anything that occurred in the past saw a 44 percent increase in home sales compared to last September! Except for new home listings, year-to-date home sales and new contracts (pending sales) stats are about par compared to last year for the same period.
Home sale inventory continues to be an issue for the housing market. Home sale inventory has been significantly low and lagging behind buyer demand since 2013. Unfortunately, the low home sale inventory is becoming political fodder, as some are blaming zoning without evidence. However, the real reason for low home sale inventory is likely due to seniors aging in place, an increasing number of people telecommuting, and changes in cultural housing norms (e.g., staying in a home for longer periods).
Even though home sale inventory continues to be a drag on the housing market, home buyers are motivated, making the housing market very competitive. Historically low mortgage rates is one catalyst for the overwhelming home buyer demand. Consider that during the go-go market of 2005-2006, mortgage rates bounced between 6 to 7 percent. However, Freddie Mac reported on October 22nd that the average US mortgage rate for a 30 year-fixed-rate-was 2.8 percent!
What can should you take away from these stats? There is likely no better time to sell a home, while housing affordability is high. The low home sale inventory has reduced seller competition, resulting in bidding wars for many properties. And those who are buying homes are taking advantage of low mortgage rates, making their housing payments more affordable than renting.
By Dan Krell
Copyright © 2020
Original located at https://dankrell.com/blog/2020/10/27/housing-pandemic-special/
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