We are halfway through 2020, and what should be the peak home-selling season. However, in these unprecedented times, the real estate industry as a whole is still recovering slowly. Here is a June 2020 Housing Market Update.
Home Sellers Are Starting to Come Back
The number of homes for sale has been lagging for years. It’s been among the housing market’s main challenges. That’s because a lack of available homes combined with rising buyer demand leads to steady price increases and declining affordability. While that can be good for homeowner equity, it’s bad for buyers – especially first-time buyers who don’t have the benefit of cashing in their equity to help fund a home purchase.
This continuing imbalance only got worse when the coronavirus led to stay-at-home orders across the country. That caused some buyers to delay their plans, but also has led to homeowners to think twice before putting their home up for sale. This caused new listings to plummet. In fact, according to realtor.com, the national inventory of homes for sale is down nearly 20 percent from last year.
The good news, though, is things are starting to get better. By the end of May, the number of new listings had improved in 45 of the 50 largest U.S. markets compared to the month before. While they’re still down, the fact that the rate of decline has gotten smaller is an indication that home sellers are starting to return to the market. If the trend continues, it’ll lead to a healthier and more balanced housing market.
Home Prices Increase 5.4% in April
The housing market, like any market, is a balance of supply and demand. Conditions are a reflection of how many buyers and sellers there are, rather than the strength or weakness of the overall economy. For example, when coronavirus mitigation efforts shut down much of the country’s economy, there was a lot of speculation about what would happen to prices. Though the economy suffered, home prices didn’t.
In fact, they rose. According to the most recent CoreLogic Home Price Index Report, home prices increased 5.4 percent in April over last year at the same time. Not only did they improve, but they also did so at a stronger pace than last April when they were up just 3.6 percent. So, why did home price gains accelerate while the economy was suffering a severe downturn?
When stay-at-home orders went into place, many home sellers pulled their listings and decided to wait a while before selling. The corresponding drop in for-sale inventory meant there were more home buyers than homes for sale, which led to more competition for available homes, bidding wars, and higher prices.
Mortgage Rates Hit Another Low
According to the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey, average mortgage rates hit another low last week. Rates were down week-over-week for most loan categories. The declines helped push demand for home purchase loans higher. In fact, requests for loan applications to buy homes rose another 5 percent from last week and are now 18 percent higher than they were at the same time last year.
Joel Kan, MBA’s associate vice president of economic and industry forecasting, says the numbers are encouraging, but challenges remain. “Purchase applications continued their recent ascent, increasing 5 percent last week and 18 percent compared to a year ago. The pent-up demand from home buyers returning to the market continues to support a recovery from the weekly declines observed earlier this spring.”
“However, there are still many households affected by widespread job losses and the current economic downturn. High unemployment and low housing supply may restrain a more meaningful rebound in purchase applications in the coming months,” Kan said. The MBA’s weekly survey has been conducted since 1990 and covers 75 percent of all retail residential mortgage applications.
If you have any real estate related questions, I’m always happy to talk with you. You can find my contact information on the right side of this page.
To your health and safety, Dani
Source: Luxury Mortgage