Demand is 25% above pre-pandemic levels
It seems that nothing, not pandemics or protests, can deter homebuyers. Seasonally adjusted demand for the first week of June is now 25% higher than it was pre-pandemic in January and February, marking eight straight weeks of rising demand. According to Sarah Martin, a mortgage advisor in Washington DC, the spike in demand is being driven by low rates and, now, easing credit. “Credit has pretty much loosened up except for self-employed borrowers, and sellers, always more careful than buyers, are finally responding to increased demand.”
Sale prices are up 3.1%; asking prices are up 9.9%
Until supply catches up to demand, prices will rise. For the first week of June, year-over-year growth in asking prices was up 9.9%, compared to 7.9% the week before, and 3.9% in January and February. Sales prices for the first week of June are up 3.1% year-over-year, up from only 1.3% in May, when offers from late March and April were still closing. The percentage of newly listed homes accepting an offer within 14 days of their debut increased from 42% in May to 47% in the first week of June, meaning that sellers who wanted to wait to list until they could get the most buyer attention are definitely getting that now.
Bidding battles are now common
The major theme of conversations with agents across the country this past week has been about bidding wars. “It’s just bananas, with so few listings and so many buyers,” said Shakur, an agent in Maryland. “But buyers are desperate. If a property is in a desirable neighborhood, buyers will overpay. Bidding wars, escalations, no inspections, agreement to pay over appraised value, all of that’s becoming the norm,” she said, adding that, “anything I’m pricing correctly right now is flying off the shelf.”
New listings are still 15% below last year’s levels
The most pressing concern for realtors in May was the lack of inventory. After falling to 21% below last year’s level in the final week of May, new listings began to recover in the first weeks of June dropping to 15% below last year’s level, an improvement of 6%. Listings accepting an offer improved as well. Two weeks ago, this number was down 11% year-over-year, but for the first week of June it was down only 9%. With demand surging and supply recovering, sales are expected to strengthen. Mortgage purchase applications, which were up 7% year-over-year in the last week of May and 13% in the first week of June, adds further data to support a strengthening real estate market.
Renters in the city are buying in more affordable outlying areas
In an exciting twist, home-ownership levels may meaningfully increase for the first time in 15 years. There is speculation across the industry that the flexibility to work remotely, combined with low interest rates, will lead to higher levels of home ownership in the U.S., which has suffered a steady decline since 2004. “With interest rates so low, a lot of people want to buy who are currently renting in the city,” said agent Elynn Chen. “They want to go somewhere for more space.”
Continued unemployment could pull first-time buyers out of the market
No one knows for sure how long the strong market will last. Tight credit in recent months has at least limited housing speculation, and it is believed that price increases have been the result of record-low mortgage rates and inventory. But even though demand is strong now, no one can say for sure what the long-term outlook is. “A lot of jobs are not coming back,” said a Seattle agent. “Would-be first-time buyers are going to say screw it. They are just thinking about how to pay rent and survive. We have a lot of band-aids with unemployment insurance right now, but those won’t last forever. The ball is going to drop, and it will be interesting to see which way it rolls down the hill.”
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