While it may be tempting to sit on the sidelines during the current pandemic, there is encouraging news that the opposite may be in order for real estate investors. The Wall Street Journal just released a very fresh perspective that the housing market is holding steady with no signs of a plummet in sight. Let’s take a look at the facts.
Home Prices and Buyer Demand Are Going Up
According to the National Association of Realtors (NAR), the median home price rose 8% to $280,600 in March vs. the same period last year. The Midwest was particularly strong with prices up 9.7% and homes selling over ask in Cincinnati.
End of April numbers may be even more telling. Redfin reports median listing prices up 1% from last year to $308,000 while Realtor.com shows that only 4% of sellers lowered prices in the week ending April 25, down from 5.7% the same week last year.
And buyer demand is rebounding. After a 34% dip in March, it’s now down only 15% from pre-pandemic levels in the week ending April 26 according to Redfin.
It’s All About Low Housing Supply
Even before COVID-19 ruled conversation, the country was in the midst of record low housing inventory. Total listings are at a five-year low according to Redfin. Units for sale are down 10.2% (vs. year ago) to 1.5 million at the end of March per NAR. Demand may have softened year over year, but supply is contracting even faster.
Many sellers have decided to ride the wave and hold firm on price. Others are reconsidering moving or worried about letting buyers into their homes during a pandemic. Most sellers believe that things will pick back up as stay-at-home orders relax and buyers can view in person.
Experts predict prices to remain steady with the potential for a slight increase. Housing data provider CoreLogic projects nationwide home prices to rise 0.5% between March 2020 and March 2021. Fannie Mae also expects median home prices to rise from $272,000 in 2019 to $275,000 this year.
Our own data points to an improving outlook. Nearly three-quarters of investors surveyed in a recent New Western study are still actively acquiring properties and weekly mortgage applications are rising at the end of April. The Mortgage Bankers Association is also seeing gains week-over-week nationally. A very positive sign: even harder hit markets like New York and California are experiencing double-digit increases in purchase applications for the week ending April 24.
For investors who may be uncertain about the impact of mortgage-forbearance policies on distressed sales, take note: NAR’s chief economist does not see any near-term effect. “You would have to see continuing job losses for a prolonged period leading to foreclosures, and even then we may not have oversupply,” notes Lawrence Yun.
This is not the same market we saw during the Great Recession. Supply and demand are dramatically different in 2020 than they were in 2008. With limited supply and rising demand as states open up, smart investors can pivot and capitalize on the current climate. This unplanned lull in everyday life may just present the perfect pause flippers need to find the right property, refresh it and be ready to go as we enter the next phase.
Our agents continue to work tirelessly to do the heavy lifting for our investors and provide them with off-market deals that match their investment criteria. Contact us to see if you qualify for access to our exclusive inventory.