People are buying houses at a record rate, and the unique global moment we’re in may be the reason why. A report from tech-powered real estate brokerage Redfin shows that housing prices and pending sales are significantly up from the same period last year. Coronavirus and the ensuing unrest may be contributing factors.
According to Redfin, homebuyer demand has increased 29% from January and February, before the pandemic reached the US. While in the four weeks before August 16, the last period reported, the median prices of homes sold were up 11% from the same period in 2019 to reach an “all-time high” of $316,375. This milestone marks the largest increase in over six years, per a press release from the company.
"Some of the homebuyers I've worked with have come into the process thinking that thanks to low interest rates and the pandemic they'll be able to get a deal," said Rhode Island Redfin agent Lisa Bernardeau. "Unfortunately I have to burst their bubble and explain that it's actually the opposite—home prices are up 10 to 20 percent from last year, depending on the neighborhood."
Despite millions of Americans losing their jobs or facing temporary leave because of the public health crisis, another statistic that’s up, surprisingly, is home sales. Pending home sales for the same four week period were up 15% from the same time in 2019, increasing 0.6% from the previous four weeks this year. This means that as we’ve gotten deeper into the pandemic, people are buying more homes. However, the report highlights the fact that home sales are still following seasonal trends: namely a decrease through the summer. Pending sales are down 8% overall from the peak during the 7-day period ending July 19.
"Schools are beginning to start again, and it seems like that has slowed the amount of homebuyer activity a little bit, but that doesn't make the market less crazy," according to Veronica Clyatt, a Redfin agent in the Oakland, California area.
All of this data begs the question: why are homes selling so well right now? Isn’t there a global pandemic? As it turns out, there are several contributing factors.
The first is that the pandemic itself is likely pushing demand while decreasing availability. The COVID-19 public health crisis has confined many people to their homes for months. Statewide stay-at-home and work-from-home guidances mean that people are spending more time within their four walls and realizing the importance of a nice home environment. The issue is particularly exacerbated by the continued closure of many schools into the fall semester, with stressed-out parents wishing their children had a little more room to play. Seeking stability and space, people have started fleeing from metropolitan areas to look for homes in the suburbs or countryside.
However, there aren’t enough homes for sale to satisfy homebuyer demand for the same reason people are trying to leave their smaller spaces: space and stability. Redfin explains that this “onslaught of consumer demand” primarily causes record-high home prices and a lack of supply. According to Redfin, the number of homes actively listed for sale is down 28% from this time in 2019, which could explain why people are willing to pay more at this moment.
Another reason why the market is performing so well is the urgency many buyers and sellers are facing. Pushed by job losses, unexpected pandemic-related costs, or a pressing necessity for more space, homebuyers are reportedly moving fast and making high offers. In this same four-week period ending August, nearly half of all sellers (46.5%) found a buyer within two weeks of hitting the market, a quick turnaround for selling a house. According to Redfin, this is the highest level seen since at least 2012. Last year, just 32.8% of homes found a buyer within two weeks.
People are also paying very close to asking prices, another telling statistic of people’s motivations today with the average sale-to-list price ratio reaching a record high of 99.1% this year. This suggests that buyers are less so looking for a “deal,” which Redfin also says is unlikely to be found right now. Instead, people are looking to close quickly on their new homes. Additionally, there’s potential influence of more sales occurring because people want to buy more homes that cost less after selling their own homes. This may be the case during this economically challenging moment when some people are looking to downgrade quickly and liquidate assets.
“Homes that are in good condition and priced well are selling very fast right now," said Wisconsin-based Redfin agent Brynn Rea. Many of the homes are in great condition because some people are being forced to sell properties they previously planned to stay in long-term. “Almost all of my listings have gone under contract within a week, receiving multiple offers well above list price.”
About the Author
Jemima is a journalist who enjoys reporting on business, particularly small business and entrepreneurship.