Annual market trends can be somewhat predictable; transaction velocity spiking in Spring and Summer and slowing through Fall and Winter results from children returning to school and adults returning to their routines. However, this year has witnessed a change; due to the global pandemic, we have experienced a year like no other. As a result, recent reports by the National Association of Realtors and Realtor.com concluded that this Fall and its subsequent months would remain opportunistic for homeowners looking to sell – An unlikely prediction compared to past trends.
The Data Behind the Report
August 2020 hit the highest level of home sales since December 2006 for existing-homes, rising 10.5% (5.43 million) year-over-year. Nationally, median home prices were up 11.1% year-over-year, and listings were down 21%. Homes were selling 39% faster than expected, or 12 days quicker. Furthermore, in the 50 largest U.S. metros, homes sold, on average, ten days more quickly than the year prior.
According to Lawrence Yun, NAR’s chief economist: “Home sales continue to amaze, and there are plenty of buyers in the pipeline ready to enter the market… Further gains in sales are likely for the remainder of the year, with mortgage rates hovering around 3% and with continued job recovery.”
California Home Sales
Several metropolitan areas in California experienced an increase in home prices this past September as well; the data below demonstrations the difference between many of California’s major metros:
|Metro||Median Listing Price YoY||Median Listing Price||Median Days on Market Y-Y||Median Days on Market|
|Riverside-San Bernardino-Ontario, Calif.||14.00%||$468,000||-15||41|
|San Francisco-Oakland-Hayward, Calif.||10.80%||$1,037,000||3||35|
|San Diego-Carlsbad, Calif.||7.10%||$776,000||-7||35|
|San Jose-Sunnyvale-Santa Clara, Calif.||5.50%||$1,199,000||-7||35|
|Los Angeles-Long Beach-Anaheim, Calif.||N/A*||$995,000||N/A*||49|
Santa Cruz County has been no stranger to these recent real estate trends, either. According to a Redfin analysis:
- The median sale price rose 26.4 percent year-over-year to $944,500.
- The number of homes sold rose 27.1 percent year-over-year.
- The median days a home stayed on the market declined 18.9 percent year-over-year to 45 days.
National Inventory Declining
In addition to increasing home prices, the recent research concluded that national inventory has been declining as well:
|Metro||New Listing Count YoY||Active Listing Count YoY|
|Riverside-San Bernardino-Ontario, Calif.||-10.10%||-55.60%|
|San Francisco-Oakland-Hayward, Calif.||-0.20%||-12.10%|
|San Diego-Carlsbad, Calif.||-5.70%||-42.90%|
|San Jose-Sunnyvale-Santa Clara, Calif.||18.80%||-24.90%|
|Los Angeles-Long Beach-Anaheim, Calif.||-11.40%||-28.60%|
Adam Contos, CEO of real estate brokerage RE/MZ Holdings, recently commented on these trends. In an article posted on Money.com, Contos concluded: “The demand for houses is easily eclipsing the available inventory in metro areas across the country.” He continued, “Buyers are moving forward in record numbers, unfazed by inventory challenges and consistently higher prices. Homeowners in a position to sell are seizing the opportunity and benefiting from the one-two combination of enthusiastic, competitive buyers.”
Contributing to the Change
The ongoing seller’s market that we are experiencing remains a direct result of the low supply of homes on the market compared to the influx of current buyers.
Why Are There Fewer Sellers in the Market?
Economic volatility and uncertainty in the future have caused many homeowners to put their plans to move or sell on hold. Here’s why:
- The Coronavirus Crash. The 2020 stock market crash, which occurred between February 20 and April 7, was identified as thefastest fall in global stock markets in financial history, and the most devastating crash since the Wall Street Crash of 1929.
- High Unemployment Rates. This year, unemployment rates peaked in April 2020 to 7%, a spike from 4.4% in March. Slowly recovering yet still high, the September unemployment rate is 7.9%.
- A moratorium on evictions executed by the Centers for Disease Control and Prevention (CDC), Department of Health and Human Services (HHS), has resulted in the halt of evictions through December 31, 2020.
- Ongoing pandemic. COVID-19 has continued to impact the global economy. Deaths around the country have resulted in business shutdowns and stay at home orders. Although many of these policies have subsided, personal interactions, and a return to ordinary life are still far away.
- Election year. Every election year, we see a shift in the market; property owners place their plans on hold, developing a strategy depending on who wins the election. This year is no exception, and, with the pandemic’s ongoing impact, Americans want to hold off on their transactions following the election.
Why Are There More Buyers in the Market?
In March 2020, the Federal Reserve announced dropping its benchmark interest rate to zero, resulting in buyers flocking to the market to take advantage of low-interest rates. More recently, the Fed announced their intention to keep rates low until 2023, creating ongoing demand in the buying community. Additionally, the adjustment to American’s routines has caused buyers to remain active.
Danielle Hale, chief economist, Realtor.com, commented: “Many buyers tend to put their home search on hold after the start of the school year, but remote learning and the desire for more space continued to fuel buyer interest in September.” She continued, “Unseasonably high buyer interest coupled with historically low inventory and favorable mortgage rates are creating a perfect storm in the housing market. While this is good news for anyone looking to sell their home, it has created tremendous competition among buyers.”
Housing Predictions 2020
No crystal ball can help us understand how the next twenty-four months will pan out; however, one consensus that appears healthy throughout the professional community is that we will continue to witness a sellers’ market through the end of the year.
To summarize, Robert Dietz, The National Association of Home Builders chief economist, said it best: “Housing demand will remain strong, supported by low mortgage interest rates, an improving labor market and a suburban shift for buyer preferences.”