The US housing market is more robust now than ever, according to Norada Real Estate Investments, a Laguna Niguel, California, residential real estate research firm. Sales are up 21% nationwide, and inventory has shrunk to 3.1 months, according to Norada. The median home price nationwide is more than $300,000 for the first time ever.
Realtor.com reports that the median listing price for the week of September 5 was 10.8% higher than the same time last year — the fastest pace of growth in more than two years.
New listings, which are the key to home sales, were down 12% for the week and could put a dent in Fall home sales despite strong buyer demand. Total inventory dropped 39%, and the number of days a home sits on the market has declined by 12 days. While activity has continued to grow, the vanishing supply of homes may be starting to slow recovery.
For example, in Colorado, there is an inventory shortage in most of the state’s markets — including Denver, where there are significantly fewer homes on the market than at this time last year, said Chris Mygatt, president of Coldwell Banker Residential Brokerage in Colorado. Sales of high-end homes valued at $1 million or more in Denver were about 50% higher in August compared to the same month last year.
“The demand in the market is indicative of people’s desire to want to make moves because of a shift in priorities,” Mygatt said. “We’ve seen homeowners making real estate decisions based off of the desire to have more outdoor space, needing dedicated office space or wanting to be closer to family.”
Much of the activity is the result of historically low mortgage rates. A survey conducted by Hoboken, New Jersey-based LendEDU found that 54% of people who bought homes during the pandemic said they did so to take advantage of the low mortgage rates. Fifteen percent said they wanted to get away from areas like New York City that have been hard hit by the pandemic.
Seattle database company Zillow Group Inc. predicts a boom in suburban residential real estate markets across the country as remote work becomes more common. That’s likely to have a big impact on central business districts (CBDs) nationwide.
Roughly half of all employees in the US worked from home when their states shut down, according to the Brookings Institution, a Washington D.C.-based nonprofit public policy organization that expects many companies will continue to allow at least some of their employees to work remotely.
It’s unclear what the long-term impact COVID-19 will have on the $2.5 trillion US office market. If employees are productive at home, it could lead to companies downsizing their space. But if companies want employees back in the office, they could lease more space to accommodate social distancing requirements until a vaccine is widely available.
What is certain is that the lack of people in CBDs is taking its toll on the restaurants and retailers that depend on lunchtime diners and shoppers who are no longer there because they’ve been working from home. In CBDs across the country, restaurants and shops are closing because they’re unable to weather the decline in foot traffic.
Remote working also is negatively impacting investment in commercial real estate. In a typical year, commercial property sales in the United States total about half a trillion dollars. But investment volume during the second quarter was $40.2 billion, down 69.9% from the second quarter last year, according to CBRE’s second-quarter US Capital Markets report.
The hotel sector was the hardest hit, recording a 91.2% decline in sales. Industrial properties showed the smallest decline at 49.8%. In contrast, multifamily housing claimed the largest share of commercial property sales at $12.9 billion, down from $47 billion during the same period last year. Office was next with $10.1 billion, down from $38.5 billion; industrial with $4.4 billion in sales, down from $20.1 billion; retail at $4.4 billion, down from $16.8 billion, other at $1.3 billion, down from $3.8 billion; and hotel at $0.6 billion, down from $7.3 billion.
Real estate industry professionals are optimistic about the future of the residential market. Home prices are expected to rise for the next few years, and with such low inventory, buyers are less selective about things like neighborhoods that aren’t easily accessible to highways or near a big city.
“Where people have been tied to physical work locations before, we are now seeing buyers have more flexibility in where they decide to put down roots,” Mygatt said. “Colorado has been and continues to be, attractive to many because of our beautiful scenery and outdoor lifestyle.”
About the Author
Margaret is an award-winning journalist who spent nearly 25 years in the newspaper industry. She has covered a variety of business topics, including residential and commercial real estate, technology, telecommunications, and cannabis.