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The pandemic has fueled a turbulent spring across industries and the housing sector has not been immune to the fallout. Although May home sale numbers may seem bleak on the surface, the most recent data for demand points to a strong month in June. Let’s break it down.
According to the National Association of Realtors®, total existing home sales fell nearly 10 percent in May – marking a three-month decline as a result of the coronavirus outbreak. “Sales completed in May reflect contract signings in March and April – during the strictest times of the pandemic lockdown and hence the cyclical low point,” explained NAR chief economist Lawrence Yun.
Inventory remains tight, down nearly 20% overall when compared with numbers from this time last year and new listings are down almost 30%. Realtor.com believes May data suggests the housing market bottomed in mid-April as these declines have actually slowed in May, signaling a return of buyers to the market.
With limited supply, May prices continued to hold firm at a remarkable record: 99 straight months of year-over-year gains. The median existing home price was $284,600 with prices up in every region.
Industry sources cite conflicting data for May’s days on market. Realtor.com reports homes sold more slowly this spring: spending 58 days on market in May, 13 days more than May of last year. In contrast, NAR notes that more than half of homes on the market sold in less than a month with investors snapping up 14% of the listings, up from 10% in April.
Yun predicts sales to rise in upcoming months as the economy reopens, potentially surpassing year-ago figures in the second half of 2020. Just released pending home figures support that prediction and indicate that the housing market may have reached the bottom.
In fact, the pending home sales index rose 44.3% to 99.6 in May, the highest month-over-month gain since NAR created the index in January of 2001. All four regions showed growth, including the hard-hit Northeast and West. Another strong sign of buyer demand, Redfin reports pending sales are recovering quickly and approaching the same level as a year ago.
“This has been a spectacular recovery for contract signings, and goes to show the resiliency of American consumers and their evergreen desire for homeownership,” said Yun. “This bounce back also speaks to how the housing sector could lead the way for a broader economic recovery.”
The Housing Market Recovery Index from Realtor.com supports this premise with buyer interest and home prices now growing faster than pre-pandemic levels. “In contrast with the 2008 great recession, housing has the potential to play hero, not villain, this time around,” according to Javier Vivas, Director of Economic Research.
Housing starts also improved in May: up 4.3% to 974,000 units. As reported by the Mortgage Bankers Association, lending standards may be tightening, but purchase activity has climbed above 2019 levels for six straight weeks as we head into July. In fact, early June numbers showed loan applications surging to a near 11 ½ -year high, another promising sign as employment gradually picks back up.
Adding another perspective, Freddie Mac’s latest Quarterly Forecast states the purchase application “is a remarkable rebound from mid-April’s trough when purchase activity was down 30%. After the Great Recession, it took more than 10 years for purchase demand to rebound to normal, but during the COVID crisis, it took less than 10 weeks.”
Looking across the sector and the data, it’s evident that the real estate market may well be in the midst of a recovery. “Nearly every graph is moving up and to the right,” reports real estate tech strategist and leading expert on iBuyers Mike Delprete. And real estate investors are positioned to play a key role in the recovery by bringing much-needed inventory to a starving marketplace.
At New Western Acquisitions, our agents have their fingers on the pulse of their local markets, finding prime opportunities for our investors. We are ready to help you secure off-market deals that match your specific criteria. Contact us to see if you qualify for access to our exclusive inventory.
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