With the nation’s economy climbing out of a COVID-19 hole, home sales continue at a record pace. Total existing-home sales rose 2.4% from July to a seasonally-adjusted annual rate of 6 million in August. Sales were up 10.5% from a year ago.
After plummeting in March, home-buying demand continues to take steps towards recovery. On average, newly listed properties remained on the market for 22 days in August, down from 31 days in August 2019. Sixty-nine percent of homes sold in August 2020 were on the market for less than a month.
“The demand for houses is easily eclipsing the available inventory in metro areas across the country,” said Adam Contos, CEO of real estate brokerage RE/MAX Holdings. “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.”
The number of homes for sale continues to lag. Housing inventory totaled 1.49 million units at the end of August, down 0.7% from July and 18.6% from one year ago. Unsold inventory sits at a three-month supply at the current sales pace, down from the four-month figure recorded in August 2019. Six-months of supply is considered healthy.
Scarce inventory has been problematic for the past few years, an issue that has worsened in the past month due to a steep surge in lumber prices and a dearth of lumber resulting from the massive wildfires devastating Western states.
Here are nine predictions from housing industry experts on what the rest of the year will spell for the nation’s housing demand. (The text has been lightly edited.)
Who she is: Chief economist for home listing site Realtor.com
What she expects: While it may not maintain its recent frenzy, housing demand is expected to remain strong for the rest of the year.
Her reasoning: Housing demand thus far has been the most recovered component of Realtor.com’s housing market recovery index, with buyers setting record levels of traffic on Realtor.com this summer. We see no signs of this demand slowing down yet, although some of what's driving the current frenzy is undoubtedly a make-up period for the lost spring buying season that will run its course.
Even as that temporary boost winds down, there are plenty of factors that will keep homebuyers in the market. These include record- or near-record low mortgage rates and lots of individuals at household-forming ages. For example, Millennials are settling down and starting families. And for those who remain employed, possibly some extra savings to put toward a down payment for a home. Extra savings will help buyers who will otherwise grapple with a challenging market thanks to rising prices and fast-selling homes, the hallmark of a market with a lot of buyers and not so many sellers.
Who she is: Policy and research manager at the Center for NYC Neighborhoods
What she expects: While overall demand looks to continue upwards, there are troubling signs that the unequal impact of Covid and disparities in credit access could keep Black and Latinx families on the sidelines, unable to take advantage of low interest rates.
Her reasoning: While interest rates are low, Black and Latinx families are at a disadvantage because they continue to face discrimination in access to mortgage financing, must overcome racial steering and average less savings for a down payment than white buyers because of generations of structural racism.
The effects of the pandemic will likely exacerbate these factors. Communities of color have been hit hardest by the COVID-19 pandemic. Black and Latinx workers have seen higher rates of infection, illness and death. They’ve also been most likely to lose pay or work due to the pandemic. Will the Covid-19 housing market lock them in as renters? Will the racial wealth and homeownership gaps widen further as the economic fallout of the pandemic continues?
Who he is: National president of the Asian Real Estate Association of America
What he expects: Thanks to historic low interest rates, we can expect housing demand to continue to be strong.
His reasoning: The second quarter is evidence of a bullish housing market with Asian American and Pacific Islanders now surpassing the 61% homeownership rate, an unprecedented number for our community. COVID-19 underscores how important a home is for our safety, particularly for families with children who continue to be sheltered in place and now find themselves needing more space for virtual learning. This won’t change any time soon, and I have a feeling this is the new normal.
Who he is: Chief executive officer and president of Realogy, a provider of residential real estate services
What he expects: The fundamental societal changes influencing homebuying will continue to drive demand.
His reasoning: Real estate’s recent momentum is not a blip on the radar. For the remainder of this year, we expect the ongoing effects of the pandemic to propel a housing evolution, driven by fundamental societal shifts in Americans’ perspectives on both homebuying and the home itself.
The pandemic fast-tracked virtual advancements in homebuying that made the process not only safer but also, in many ways, more convenient. At the same time, we’re seeing Americans simply more willing to move.
Who she is: Managing broker for Engel & Völkers Atlanta
What she expects: As interest rates remain low, there will be continued strength and price accelerations in markets with attainable affordability and luxury markets where taxes are lower. New construction will continue to boom as new and pretty almost feels like a gift in this environment.
Her reasoning: We will continue to see the market in motion. As we enter another season, and continue to navigate a new normal, people will continue to reevaluate space, options and quality of life. Parents are not constrained by timelines, like moving before the school year starts. More companies are offering remote options. And Millennials, the largest homebuying segment, are being joined in the market by Gen Z.
Specifically in Atlanta, August is generally a slower period. However, this year, pending sales were up 28% year-over-year for August. Sale prices are continuing to climb as the median price is up 16% year-over-year.
I am confident that real estate will continue to be a leader for the economy, and I believe we will also start to see if there is an inventory shift as people want to move or need to liquidate their home and assets due to unemployment.
Who he is: The National Association of Home Builders’ chief economist
What he expects: Housing demand will remain strong, supported by low mortgage interest rates, an improving labor market and a suburban shift for buyer preferences.
His reasoning: Housing has been and will remain a bright spot for the economy. The NAHB/Wells Fargo Housing Market Index measure of builder confidence reached a data series high in September on strong buyer traffic numbers. And U.S. demographics favor owner-occupied housing, particularly as the leading edge of the Millennials turns 40.
The Covid-19 crisis spotlighted the resiliency of single-family suburban housing during a public health crisis, as large numbers of people worked and studied at home. Housing partially replaced other forms of real estate.
This generated a suburban shift for single-family and multifamily construction during the second quarter of this year. These factors will persist at least through the end of 2020, with partial effects lasting even beyond the deployment of a vaccine. Nonetheless, the challenge for housing right now is supply, particularly given the 170% run-up in lumber prices since mid-April and the ongoing construction skills shortage.
Who she is: Chief economist at Redfin, a technology-powered real estate brokerage
What she expects: Demand will continue to steadily increase at an unseasonable rate until later this fall, where we’ll see a slight decline due to general seasonality and the election before it picks up again in January. That will drive up home prices and home sales.
Her reasoning: After months of nearly relentless demand, Redfin isn’t seeing any indicators that the housing market is positioned to slow down. Sale prices were up 11% in August fueled by low mortgage interest rates, growing competition and tightening supply. Sellers were a little late to the game this year, but August data shows that they’re emerging thanks to high home prices, which will help improve the number of home sales. While elections historically don’t have a significant impact on housing demand, this year’s especially tumultuous election may slightly delay plans to buy or sell.
Who he is: Chief product and technology officer at ATTOM Data Solutions, a real estate data provider
What he expects: ATTOM expects the odd-price dynamic of outsized home price gains to normalize next spring as COVID eases and sellers get back into the market.
His reasoning: While buyers are at somewhat of a disadvantage with less options and facing an uncertain future in not knowing whether to buy a home before prices go up even more or wait to see how the pandemic plays out, the latest price and profit numbers present good news for homeowners.
With prices continuing to rise in 93% of U.S. housing markets in the second quarter of 2020, and increasing annually on average around 6%, sellers are reaping the rewards. Further contributing to that good news for homeowners, profit margins have reached new post-recession highs nationwide and increased annually in 81% of markets. We also expect mortgage rates to stay low through next year, helping to contribute to buyer demand. So, while there are multiple factors that could help maintain the housing market boom of the last eight years, the unemployment rate remains high and the pandemic continues to loom, creating an uncertainty in the market and threatening our economic stability.
Who he is: CEO and founder of Kris Lindahl Real Estate, a brokerage serving Minnesota and Wisconsin
What he expects: Housing demand will continue to remain strong throughout the rest of the year. We are seeing motivated buyers and far more demand than inventory. I don’t expect that to change drastically in 2020. Buyers are not giving up their searches, and they continue to remain in the market.
His reasoning: Low inventory continues to be a major factor. There are a lot of potential buyers in the market who have been unable to find a home and make a purchase. They’re still looking. 2020 has caused many people to re-evaluate the importance of home and what they want in a home. As people and families continue to do it all in their space — working, schooling, living, playing — new priorities have emerged. Whether it’s a home office, additional recreation space or an improved backyard, people are looking for features that may not have been a priority to them nine months ago.
Record-low interest rates are also driving demand. First-time buyers are realizing buying is now cheaper than renting in many cases. Other homeowners are realizing they can upsize without their monthly mortgage payment changing much.
All of the factors currently driving demand will continue to play out through the end of the year. Interest rates make it a great time to buy and low inventory makes it a great time to sell. That one-two punch will continue to influence a very active market.