With a worldwide health crisis that drove a pause in the economy this year, the housing market was greatly impacted. Many have been eagerly awaiting some bright signs of a recovery. Based on the latest Existing Home Sales Report from the National Association of Realtors (NAR), June hit a much-anticipated record-setting rebound to ignite that spark.
According to NAR, home sales jumped 20.7% from May to a seasonally-adjusted annual rate of 4.72 million in June:
“Existing-home sales rebounded at a record pace in June, showing strong signs of a market turnaround after three straight months of sales declines caused by the ongoing pandemic…Each of the four major regions achieved month-over-month growth.”
“The sales recovery is strong, as buyers were eager to purchase homes and properties that they had been eyeing during the shutdown…This revitalization looks to be sustainable for many months ahead as long as mortgage rates remain low and job gains continue.”
With mortgage rates hitting an all-time low, dropping below 3% for the first time last week, potential homebuyers are poised to continue taking advantage of this historic opportunity to buy. This fierce competition among buyers is contributing to home price increases as well, as more buyers are finding themselves in bidding wars in this environment. The report also notes:
“The median existing-home price for all housing types in June was $295,300, up 3.5% from June 2019 ($285,400), as prices rose in every region. June’s national price increase marks 100 straight months of year-over-year gains.”
“Home prices rose during the lockdown and could rise even further due to heavy buyer competition and a significant shortage of supply.”
Buyers returning to the market are a great sign for the economy, as housing is still leading the way toward recovery. If you’re ready to buy a home this year, let’s connect to make sure you have the best possible guide with you each step of the way.
Last week, a very well-respected real estate analytics firm surprised many with their home price projection for the next twelve months. CoreLogic, in their latest Home Price Index, said:
“The economic downturn that started in March 2020 is predicted to cause a 6.6% drop in the HPI by May 2021, which would be the first decrease in annual home prices in over 9 years.”
The forecast was surprising as it was strikingly different than any other projection by major analysts. Six of the other eight forecasts call for appreciation, and the two who project depreciation indicate it will be one percent or less.
Here is a graph showing all of the projections: There’s a simple formula to determine the future price of any item: calculate the supply of that item in ratio to the demand for that item. In housing right now, demand far exceeds supply. Last week mortgage applications to buy a home were 33% higher than they were at the same time last year. The available inventory of homes for sale is 31% lower than it was last year. Normally, these numbers should call for homes to continue to appreciate.
Because of the uncertainty with the pandemic, any economic prediction is extremely difficult. However, looking at the limited supply of homes for sale and the tremendous demand for housing, it is difficult to disagree with the majority of analysts who are calling for price appreciation.