An Economic Bright Spot: the Housing Market
Amid a wave of disappointing economic news primarily related to the coronavirus pandemic there is a bright spot.
The housing market has seen a strong, upward trajectory in recent months. Existing home sales have rebounded in June and July, a sign that the real estate market is making a comeback. According to the National Association of Realtors (NAR), sales as a whole (that is, completed transactions that include single-family homes, townhomes, condominiums and co-ops), rose 8.7% year-over-year in July, from 5.39 million in July 2019 to 5.86 million in July 2020. And prices continue to climb nationwide. The median price for all housing types was $304,100 in July, up 8.5% from the prior year. In fact, year-over-year prices have risen in every region for over 8 years as inventory continues to fall. For the first time ever, national median home prices breached the $300,000 level.
Property is selling more quickly as well. In June 2020, more than 60% of homes sold were on the market for less than a month. And in July, 68% of homes sold in less than a month. Sellers who are putting their homes or investment properties on the market are often seeing multiple offers and immediate sales.
“Homebuyers’ eagerness to secure housing has helped rejuvenate our nation’s economy despite incredibly difficult circumstances,” said NAR President Vince Malta recently. “Admittedly, we have a way to go toward full recovery, but I have faith in our communities, the real estate industry and in NAR’s 1.4 million members, and I know collectively we will continue to mount an impressive recovery.”
Below is a regional snapshot of existing home sales for July 2020 from the National Association of Realtors. Sales in all but one region are up from a year ago.
- Northeast – Existing-home sales were up 30.6%, recording an annual rate of 640,000 in July, a 5.9% decrease from a year ago. The median price in the Northeast was $317,800, up 4.0% from July 2019.
- Midwest – Existing-home sales jumped 27.5% to an annual rate of 1,390,000 in July, up 10.3% from a year ago. The median price in the Midwest was $244,500, an 8.0% increase from July 2019.
- South – Existing-home sales climbed 19.4% to an annual rate of 2.59 million in July, up 12.6% from the same time one year ago. The median price in the South was $268,500, a 9.9% increase from a year ago.
- West – Existing-home sales were up 30.5% to an annual rate of 1,240,000 in July, a 7.8% increase from a year ago. The median price in the West was $453,800, up 11.3% from July 2019.
Why is the housing market doing so well?
For one, historically low mortgage rates are buoying the housing market, allowing buyers to benefit from the record low rates. The average rate for a 30-year fixed-rate mortgage was 3.61% in late June, 2.99% in late July, and down to 2.91% in late August, according to Freddie Mac.
People are also making strategic decisions to move away from urban centers and toward the suburbs and exurbs. Homes have become the place where we work and play for the foreseeable future. The trend began in early spring, when schools closed across the country and companies began allowing employees to work from home.
Buyers are looking for fresh air, backyards, pools, home offices, homeschooling space, plus proximity to the outdoors – beaches, lakes, and parks. As more people shop online for groceries, household items, and more, proximity to retail stores is less of a priority.
Some people are moving because, having spent so much time at home during the pandemic, they have become dissatisfied with their current housing. Searches for single-family home are up significantly, according to online real estate sites like Zillow.
“The housing market is well past the recovery phase and is now booming with higher home sales compared to the pre-pandemic days,” said Lawrence Yun, NAR’s chief economist. “With the sizable shift in remote work, current homeowners are looking for larger homes and this will lead to a secondary level of demand even into 2021.”