Realtor.com says U.S. housing market caught in ‘lopsided recovery’

The record low interest rates, working remotely, and the desire for more space as a reaction to the pandemic caused the housing market to outperform much of the economy throughout 2020. According to a new report by realtor.com, today, the housing market remains more lopsided than ever as the gap between buyer demand and supply widens.

The realtor.com Housing Market Recovery Index, which tracks new listings, buyer demand, time on market and prices, stood at 101.6 for the week ending March 6. Aside from new listings, which remain below the PRE-COVID baseline, the market was tracking ahead of pre-pandemic levels at the end of January 2020.

“The housing market bounced back so much faster than other sectors of the economy that many have forgotten that housing activity slowed to a crawl during the early days of the pandemic,” said realtor. com Chief Economist Danielle Hale. “One year later, the demand for housing remains strong, while supply remains limited.”

Hale noted there are reasons to believe a change may be on the horizon. “The housing market’s lopsided momentum could ease in the coming months,” she said, adding, “We expect the vaccine’s rollout to alleviate some sellers’ anxieties, which could help the supply crunch. At the same time, although interest rates remain low, they’ve begun to increase, which could test buyer demand in the coming months.”

Here is the home search website’s recap of the pandemic’s impact on the housing market:

Median listing prices are up 14.3 percent year-over-year. After stalling at the onset of the pandemic, listing prices have posted double-digit price growth for the past 30 weeks. The gap between supply and demand was sizable before the pandemic, and in a move that surprised many, the pandemic boosted buyer interest without a commensurate increase in seller activity, worsening the market’s existing imbalance and driving prices to record highs.

The lack of listings in January and February of this year has created a 200,000 gap in new listings. New listings were 27 percent lower this year than they were the same week ending March 7 last year. Following an uptick at the end of 2020, the first few months of 2021 have been marked by large and consistent declines in new listings. New listings traditionally increase in March and April, and the expectation is they will grow again this year, especially compared to last year when the disruptions to seller activity were largest.

Total active inventory continues to decline, dropping 51 percent year-over-year in the week ending March 6, 2021. With buyers active in the market despite, or perhaps because of the uptick in mortgage rates, homes are selling quickly and the total number actively available for sale at any point in time continues to decline.

During the week ending March 6, homes sold six days faster on average than a year earlier. Buyers not only have fewer homes to choose from, they need to act fast to succeed.

According to Joanne Fraser, president of the Silicon Valley Association of Realtors, sales of homes in Silicon Valley are moving quickly. “The market has become extremely competitive for buyers in the region, with many homes receiving multiple offers. According to MLS Listings data, the median days on market in Santa Clara County remained at eight days in February. In San Mateo County, days on market dropped to 15 days compared to 25 days in February of 2020.”

Fraser said buyers are feeling the pressure to make a decision quickly on whether to purchase a home. “It’s frustrating for many buyers who have bid on homes multiple times and lost. We need more new listings in order to have a healthy and sustainable housing market.”