SantaFeToday.com Santa Fe’s Hometown News
By Varela Real Estate
Leaders in the local residential real estate market are optimistic for a rebound despite the nose-dive in sales and listings caused by COVID-19 pandemic.The number of sales in April was 58% lower this year than last – 512 pending sales compared to 1,218 in April 2019. The year-to-date figure is 20% lower than the same span of time in 2019. Inventory – the number of houses available for sale, which was already low, dropped to a historic low of 4.1 months of supply.
COVID-19 hit the home-selling market during the usually robust spring season.
Data from Realtor.com shows a big drop in sales and new listings. The outlook for home sales is uncertain and very reliant on shape of the post-COVID-19 recovery.
As states reopen for business in stages, every industry wants priority. One approach is to prioritize those that can best jump-start local economies, such as businesses involved with residential real estate. Home sales have a ripple effect, leading to more work for contractors doing renovations and for local retailers, whether they sell mattresses, furniture, or appliances.
The housing market was running at a record pace in the early stages of this outbreak in February 2020, with sellers continuing to gain leverage, and buyers benefit from lower mortgage rates. We saw some of the best home sales and housing starts to pace in more than a decade until February 2020.
Home sales have declined due to social distancing & economic unpredictability but home prices are still strong across the nation
According to Realtor.com, in April 2020, the median national listing price grew by only 0.6 percent year-over-year, to $320,000. Of the largest 50 metros, now only 30 still saw year-over-year gains in median listing prices, down from 45 last month.
What Do Housing Market Indicators Forecast Now? Homes Sales & Their Forecast
Home sales generally pick up in the spring. People start shopping for new homes around Spring Break with the hope of moving over holiday weekends like Memorial Day weekend or moving during the summer when it has the least impact on their kids’ education. This is why housing market predictions always include an increase in sales between March and September.
The federal government’s shutdown of so-called non-essential businesses put a hold on most real estate transactions. Renters are still able to get critical repairs like someone coming to fix a broken air conditioner. Rent and mortgage payments may be deferred in some cases, but others continue to pay their bills so they don’t have to worry about a lump sum due in four months.
But the shutdown intended to slow the spread of the coronavirus has stalled real estate sales. Transactions that were already underway were completed. And real estate agents are trying to shift to virtual home tours via panoramic pictures of every room and drone photography.
US housing market predictions suggest that this will help some homes sell, but it isn’t enough to get people to sign the dotted line at the rate they used to. After all, you can’t get home inspectors and appraisers out to properties during government-ordered shutdowns, and that’s essential to completing the real estate transaction.
Capital Economics’ housing market predictions are that we’ll see a one-third decline in home sales for the spring of 2020. Fannie Mae is assuming that the economic shutdown will last through May and the spike in unemployment will drag on the housing market for the entire year. This is why Fannie Mae is predicting a 15 percent drop in home sales for 2020 over 2019 numbers.
Latest Update On Housing Prices
- Many real estate experts do not predict a steep price declines in the next 12 months.
- Home prices are holding up to the decline in transaction activity.
- The median list price on pending contracts in the four weeks through April 26 was up 2.6% from one year ago.
- As of the week of April 18, the median listing prices on Realtor.com are higher in 65 out of the largest 100 metro areas compared to one year ago.
- Median listing prices were higher in 52 metro areas compared to April 11 prices.
- Asking prices bumped up 1.6% compared with a year ago mostly because Sellers see the current market situation as a short-term speed bump.
- Locally, 68 of 99 metros saw asking prices increase over last year.
- The April national median listing price was $320,000, up 0.6 percent year-over-year.
- Great time for Sellers to Capitalize on Price
Latest Update On Housing Supply
- On the existing supply front, the total number of homes available for sale continued to decline in April 2020, although at a slightly decelerating pace as opposing forces pulled inventory in opposite directions.
- The number of newly listed homes for sale also declined.
- Newly listed properties in April 2020 decreased by a significant 44.1 percent since last year.
- 99 of the top 100 largest metros saw declines in the number of homes available for sale.
- Nationally, inventory decreased 15.3 percent year-over-year, a slower rate of decline compared to the 15.7 percent year-over-year drop in March.
- Inventory in large markets decreased by 16.0 percent.
- Buyers and sellers still managed to work through the process even with social distancing constraints, but the limitations are taking a toll on activity.
- The inventory of newly listed properties declined by 44.1 percent over the past year, and 45.4 percent in large markets, as sellers paused in response to COVID-19.
- Great time for sellers to Capitalize on Price with less competition.
Housing Demand And Its Forecast
Housing market predictions that take Covid-19 into account have already come out. Capital Economics is estimating four million homes will be sold in 2020. This would be the lowest rate since 1991. For comparison, roughly 5.3 million homes sold in 2019.
The trade war with China threatened international trade, creating a cloud that deferred business investment. Now we’re looking at a certain economic downturn due to the government’s choice to close the vast majority of businesses, nearly killing the service economy.
Experts think that the economic cost we’ve paid to try to contain the virus will weigh down the economy into 2021. That is why home sales are expected to be jump to around six million in 2021.
The federal government has dropped interest rates in an attempt to stimulate the economy. We can expect a wave of mortgage refinances in order to save money. Fannie Mae predicts 40% more mortgage refinances in 2020 than 2019.
Housing Affordability Index – Median Household Income vs Median Home Price
Affordability was already a problem for the US housing market before the coronavirus hit. There was a shortage of affordable housing, driving up the cost of the homes Millennials can afford. This is important since half of all home mortgages are given to Millennials. And they are forced to compete for new housing stock since Boomers and Generation Xers tend to hold onto their homes.
The housing affordability index determines the affordability of the housing market by comparing the median household income to the median home price. The national housing affordability index was 170.0 for February 2020. That was a nearly one percent increase from the prior month and an eight percent increase from a year before.
An affordability index of 100 would mean that the average person could afford the average home. An increasing affordability index means more people are priced out of the housing market. The economic fallout of the coronavirus is probably going to make housing less affordable, not more so.
What will 2020 be like for buyers?
If you qualify for a mortgage, you have a more limited selection and prices close to what they were before the coronavirus hit, but you have relatively little competition.
To put it simply, the US housing market is ripe for investment in 2020 with low interest rates and less competition. It is a great time for sellers to capitalize on price and less competition. A multi-generational housing market is creating limited supply and increased competition, driving up prices at the affordable end of the market for the foreseeable future.
