The temperature may be going down as we inch closer to winter, but home prices in the U.S. are still heating up — and there are few signs of cooling.
Normally, home sales peak in the summer and slow once kids start returning to school. That was not the case this year.
In the third quarter of 2020, median single-family home prices rose in all 181 metropolitan areas tracked by the National Association of Realtors. Of those, 117 saw double-digit price growth from a year earlier. Meanwhile, the median sales price of an existing home sold in October 2020 hit $313,000, up from $271,100 in October 2019 and $310,600 in August, according to NAR.
“For all metro markets to experience a price gain is implying truly something magical is going on as regarding how people view a home,” says Lawrence Yun, NAR’s chief economist. Looking forward, “This winter home sales activity could be one of the best ever for the holiday season based on on-going prevalence of multi-biddings and generational low mortgage rates.”
Here’s what home buyers and sellers need to know about this winter’s housing market.
Home prices will keep climbing …
Mortgage rates have hit 13 record lows this year. For the week ending November 25, Freddie Mac put the average rate of a 30-year mortgage at 2.7% with 0.7 points paid. Assuming mortgage rates stay around 3% — which many economists expect — Frank Nothaft, chief economist at real estate data analytics firm CoreLogic expects home prices to be 6% to 8% at the end of this year than they were at the end of 2019.
During the first quarter of 2021 — January through March — he predicts appreciation will slow down to 3% to 6% as more sellers list their homes and a vaccine potentially becomes available.
Some markets are experiencing even bigger price increases. “Home prices are rising here at the fastest pace that I’ve ever seen,” says RE/MAX agent Sheila Smith, who has been a real estate agent in Boise, ID since 2006. “They’re up 15% from a year ago, which is really remarkable.”
Like in many regions, home sale activity in Idaho usually softens during the cold-weather months. “People typically hunker down here to stay warm, so we usually see fewer homes sold in the winter,” she says, “but it doesn’t look like demand from buyers is changing at all as we enter winter this year.”
… and selling quickly
Homebuyers should be prepared to act fast this winter when they find the right property. Across 52 markets, the average home sold in October went under contract in 38 days, according to RE/MAX's National Housing Report, marking the fastest pace of any month in the report's 13-year history.
Smith says new listings in Boise are going under contract in just seven days on average. “Everything’s getting snatched up,” she says.
With only a 3.6-month supply of homes available as of the end of September — the third-lowest level since the Census Bureau began tracking in 1963 — that dynamic is not likely to change soon. Given this stiff competition, Matt Parker, a Seattle real estate agent at Keller Williams, urges buyers to be patient. “You may have to make offers on four or five homes before you have an offer accepted.”
Buyers will still want larger homes
A number of city dwellers—especially those cooped up in tiny apartments—have moved to the ’burbs this year in search of homes with more living space. Smith expects that migration to continue this winter. “The majority of our buyers are coming from out of state right now, with one reason being that homes here are more affordable than they are in a lot of other cities, so you can get a larger house here for the same amount of money,” she says.
Parker expects demand for larger homes to increase this winter. “People want more space and more privacy, and more control of their surroundings,” he says. “Some people are buying acres of property far away from Seattle, in areas that I’ve had to look up on a map.”
A spike in COVID-19 cases could halt in-person showings and open houses
At the beginning of the pandemic, when social distancing measures and stay-at-home orders were first put into place, many sellers were hesitant to let prospective buyers inside their homes. For a time, it was not even legal for agents to give home tours in some places. That forced buyers and sellers to rely on technology, such as virtual home tours, to view and show properties.
Then in the fall, many sellers resumed holding open houses and allowing private showings. But Nothaft says that could all change if COVID-19 cases soar this winter, like they have in recent weeks across the country. “If coronavirus cases spike, I think a lot of home sellers may make showings more restrictive, and some might even postpone listing their homes altogether,” he says. “That would heighten the need for technology like 3-D tours.”
Nancy Newquist-Nolan, a real estate agent with Coldwell Banker in Santa Barbara, Calif., agrees. “If coronavirus infections here start rising, I think a lot of home-buying elements could go virtual again,” she says.
Deals may (still) be hard to find
In a normal year, Parker says buyers in his market can nab 5% to 10% discounts when purchasing a home in the winter, since there’s less competition. “I don’t think that’s going to happen this winter,” he says. “There’s just too much demand and not enough supply.” Case in point: “Last winter I didn’t have a single buyer because the market was slower,” he says. “So far, I’m already working with six buyers.”
Likewise, demand for new homes is strong and supply is limited, says Robert Dietz, chief economist at the National Association of Home Builders. That, combined with an uptick in lumber prices this year, means new homes are selling at top dollar. “Building materials are significantly more expensive than they were before the pandemic, so that’s forced home builders to raise prices,” he Dietz.
Furthermore, bidding wars may very well continue. (According to real estate brokerage Redfin, 56.3% of its offers on homes faced competition in September.) Smith’s advice for home sellers this winter? “Don’t jump on the first offer that you receive,” she says. “Set a deadline for offers and really evaluate all of the offers that you get. Also, don’t just look at the offer price. A cash buyer is really attractive right now, since a lot of home appraisals are coming in low.”