Uncertainty shrouds the housing market through 2020
Real estate across the United States is heating up, rekindled by growing demand and insufficient supply.
Mending from the sudden sharp drop in activity due to the coronavirus crisis, real estate across the United States is heating up, rekindled by growing demand and insufficient supply.
The National Association of Realtors’ (NAR) pending home sales index, a future-looking indicator of completed sales based on signed contracts, posted a staggering comeback in May, the latest month for which data is available. The index spiked 44.3 percent, registering the highest month-over-month increase since its inception in 2001.
First- time home buyers Stuyve Pierrepont and his wife said they have seen this shift occur almost overnight.
The Pierreponts, who work in Washington, D.C., and previously rented in Northern Virginia, renewed their 18-month home search in early 2020. Prior to the viral outbreak, the couple looked at roughly a dozen homes. During the pandemic, they only saw four residences in person. But the couple wasn’t ready for the speed with which fellow home shoppers were scooping those houses off the market.
“It’s a seller’s market,” said Pierrepont, a finance professional who runs a blog about leading an environmentally conscious lifestyle. “We were back and forth on whether timing was right to buy a home, given everything that’s happening. The big surprise was that the markets we were considering didn’t slow down at all.”
The couple toured a house in Annapolis, Md., for example, which went under contract later the same
day. “There were a couple of times when we saw places we really wanted, and they sold before we could act,” Pierrepont said. “We were really discouraged by that fact.”
Their real estate agent, Shane Hall of the Shane Hall Group, newly associated with Compass and formerly with TTR Sotheby’s, said in late June that Annapolis, which lies less than an hour east of the District of Columbia, had a single month of supply, meaning that if no new listings were to come on the market, all existing stock would be purchased in 30 days.
“That’s incredibly rare,” Hall said. “We just don’t have a ton of inventory. And we have a lot of demand.”
Mortgage rates remain low
With the country’s economy tentatively reopening and shelter-in-place restrictions easing, housing experts forecast that home sales will rise through the summer. The biggest constraint is the number of listings, which are returning to the market only gingerly compared to the appetite for them.
The latter is in part whetted by historically low mortgage rates that are now hovering around 3 percent, nearly 2 percentage points below their level about a mere 18 months ago and where they are expected to remain this year. Annualized new mortgage applications have trended up for weeks.
Home buyers’ vigor has powered the national housing market, despite declines in mostly all economic indicators. For the most part, home showings — enhanced with hand sanitizer and face masks — have continued throughout the pandemic. The various services supporting the industry, from inspections to closings, have shifted to alternative modes such as the Internet, staying operational. And with the start of summer, home shoppers’ desire to make what is probably the largest financial commitment in their lives — in such an uncharted time — hasn’t seemed to slacken.
“If anything, that seems to be a ray of sunlight: We’re seeing buyers more active than expected,” said George Ratiu, senior economist with listing website Realtor.com. “Looking at our weekly inventory statistics, we’re seeing that total listings are down partly because new listings are down. But [also because] those homes that are on the market are clearly finding buyers quickly and that’s key.”
For instance, in the Tampa area in Florida, which has seen an influx of buyers from the Northeast because of the pandemic, active upscale inventory through June 23 was 26 percent lower than a year ago, said Jennifer Zales, luxury real estate agent with Coldwell Banker. At the same time, however, completed sales of homes above $ 1 million totaled 109, or three more than for the whole of June 2019, Zales said. Meanwhile, a little over 230 residences asking $1 million and up, including condos, townhouses and single- family houses, were under contract.
“We have a lot of pentup demand from the spring season that did not happen,” Zales said. “I feel like somebody took my regular summer season, which is usually very regular, but dumps the whole spring season on top of the summer season. We’re extremely busy.”
A W-shaped rebound?
This appears to be the latest recurring theme across the United States, even if the summer months traditionally are calmer with vacations and family activities stealing the focus from buying or selling a house. Beyond the next couple of months, angst about the fall, when the uncertainty of the presidential election mixes with a still-wobbly economic outlook and fears of a second wave of coronavirus infections, still permeates forecasts.
While the U.S. housing market is entering an invigorated summer season, characterized by low mortgage rates, rising home values and steep competition among home shoppers, uncertainty still shrouds the outlook for late 2020.
Even if some predictions point to a V-shaped coronavirus recovery, some forecasts, including Realtor.com’s, say the rebound would actually look like a W. Home selling and purchasing naturally slow down during the colder months, but factors such as a rise in new coronavirus cases and prolonged unemployment would exacerbate any seasonal declines — and soften home values.