As we enter into the second half of 2020, the public is eagerly awaiting the year to be over and for life to return to normal. 2nd Quarter GDP showed the economy contracted by 32.9%, but added 4.8 million jobs with the national unemployment rate falling to 11.1%. In IIllinois, the unemployment rate fell to 14.6% from April’s high of 17.2% (it was 3.9% in August of 2019).
If the economists are correct, the housing marketing should be telling a somber real estate story since the unemployed can’t purchase homes, right? Not so fast.
Even with the doom and gloom, the mortgage industry has grown substantially with refi and purchases; the housing market is booming. If you’re an attorney or real estate agent – we are noting that you have been busy this past month. We have been too, and enjoy seeing you and your clients at the closing table. So what’s going on?
The post-pandemic upswing has continued with less home inventory so it’s a race for buyers to see and secure the homes they want.
Per Redfin’s Blog, nationally 46% of homes sold within the first two weeks on the market, the highest level since 2012. Compared to the same time period last year, 14% more buyers found a home within two weeks. This somewhat contradicts Realtor.com’s housing market trends report which noted that homes are selling at a similar pace as last year, spending approximately 60 days on the market in July (versus the more than 75 days this past June).
Both reports indicate that demand is much stronger than we would normally see this time of year – the seasonally adjusted Redfin Homebuyer Demand Index was up 29% from pre-pandemic levels in January and February. Pending home sales were up 10% versus 2019, although they only increased 0.2% between the four-weeks ending July 5 and August 2.
Location, Location, Location!
Even with the weakened economy, the introduction of teleworking and working from home is giving buyers the flexibility to move to larger residences further from their place of employment. This shift is increasing buyer demand in suburbs and small towns versus the city.
Per a national study of realtors, a quarter indicated their client’s preferences have changed due to COVID-19 – shifting from train stations to parking spaces (22%), opting for a home office versus a shorter commute (24%), and a house over a condo or apartment (12%).
Prices are up – are they here to stay?
The pre-pandemic economy was soaring and the year started with an upward swing. Although home sales dipped during the lockdown, pent-up demand, lower inventory and renters looking to become buyers caused a rising shift in July home prices by 8.5% nationally (an increase of 5.1% over 2019). In the midwest, prices have increased 9.1%.
Though this is positive news, economists and real estate market professionals forecast prices dropping by mid 2021. Corelogic estimates that due to prolonged economic damage and wavering federal commitment, that nationally home prices will fall by 1% year-over-year by June 2021. Haus is predicting a drop of only a half percent or less by 4th quarter 2021.
So if you are working with buyers or sellers – take advantage of the market. On your marks, get set, go!
This article was written by Edan Gelt, MBA, CMD