Area homes going fast, at higher prices in pandemic
Despite a recession and record job losses, home prices accelerated through the pandemic, rising 10 percent nationwide in November from the year before. As recently as 2019, home price growth was less than 4 percent, according to the S&P CoreLogic CaseShiller Index, which tracks singlefamily home sales.
“The housing market continued to hold stronger than expected throughout the last months of 2020 despite increases in infection rates across the country,” said Selma Hepp, CoreLogic deputy chief economist, in a statement.
In Houston, the median sales price in November rose 12 percent from the year before, the greatest year-over-year increase in more than seven years, according to data from the Houston Association of Realtors.
Part of the reason is a lack of inventory. Houston inventory — measured at the number of months it would take to sell homes currently on the market at the rate they’re going for — fell to the lowest on record: 1.9 months as of December. Six months’ worth of inventory is considered a balanced market.
“Given that we are unsure of when social interaction will be safe again, homebuyers will continue to compete for fewer and fewer homes available for sale, which will drive home prices higher,” Hepp said.
What’s more, low mortgage rates, driven to all-time lows by the pandemic and its accompanying recession, are giving home prices room to grow. When investors are concerned about the future of the economy, they seek safer investments and pour money into government bonds and mortgage debt — much of it backed by government-sponsored companies Freddie Mac and its sister company, Fannie Mae.
Investors are so hungry for security that they are willing to accept lower yields, driving down the interest paid on bonds and mortgages. Actions by the Federal Reserve to support the economy,
including cutting shortterm rates to near zero and buying government- and mortgage-backed bonds, are also driving down mortgage rates. Lower mortgage rates mean homebuyers can afford to buy a more expensive home for the same monthly payment.
Rents for single-family homes are also rising. They were 3.7 percent higher in November than the year before, according to the CoreLogic Single-Family Rent Index.
“Rent increases for single-family properties rebounded in recent months and in November exceeded the pre-pandemic rate,” said Molly Boesel, principal economist at CoreLogic. “This is in contrast to rents for multifamily properties, which have decreased as tenant preferences shifted away from high-density apartment buildings to lowdesnity, single-family homes.”