Has the real estate market turned around during this unprecedented time? Apparently, yes.
Home sales surpassed pre-pandemic levels for the first time the week ending July 5, up 2% on a seasonally adjusted basis compared to January and February levels, according to a new report from Redfin, a technology-powered real estate brokerage.
The housing market continued its recovery in the week ending July 5 despite the rise in COVID-19 cases. Demand is being propelled primarily by record-low mortgage rates; the average 30-year fixed rate was down to 3.03% for the week ending July 9.
“The industry is responding to an avalanche of applications for refinances and purchases,” said Rob Foos, a mortgage advisor with Redfin Mortgage in Boston said in the news release. “A combination of rock-bottom rates plus pent-up purchase demand has resulted in the highest levels of purchase applications in about a decade.”
Several leading indicators suggest home sales will continue to increase in the coming weeks; pending sales grew 10% from pre-pandemic levels on a seasonally adjusted basis and the Redfin home-buying demand index has hovered around 20% above the pre-pandemic levels for seven straight weeks. Mortgage purchase applications were also about 15% above pre-pandemic levels.
Potential Sellers Worry About Finding Next Home
New listings were at their pre-pandemic levels for three straight weeks, up 1% on average on a seasonally adjusted basis. But there aren’t enough new listings to satisfy the strong homebuying demand. As a result, the total number of homes for sale was down 29% from a year ago. Redfin agents report that sellers are now rarely citing coronavirus concerns as a reason not to list, but more often cite the lack of homes for sale itself as the thing that’s holding them back, the news release said.
“Some of my clients are considering selling, but it’s a matter of finding a home they can buy,” said Redfin agent Thomas Wiederstein in Phoenix in the news release. “Even if they do find a home that checks all the boxes, many move-up buyers can’t buy a new home before they sell their current one. With bidding wars so common, it’s very hard to get an offer accepted that’s contingent on the sale of the buyer’s current home.”
Lack of Homes for Sale Fuels Competition
Buyers face competition more often than not, as more than half of Redfin offers faced a bidding war in June for the second month in a row, and homes are going off-market quickly. The share of listings that went off-market within two weeks stood at 45% this week, up from 35% a year ago. Shoshana Godwin, a Redfin agent in Seattle, is seeing a return to bidding wars and buyers waiving contingencies to make their offers more attractive, according to the Redfin news release.
“We’re back to buyers waiving their rights to cancel the contract if something pops up during the inspection or they can’t get their loan approved. Buyers used to try to inspect the home before writing an offer, but now sellers are providing an inspection report upfront. That brings in even more bidders because they don’t need to spend $500 on inspection just to make an offer,” Godwin said in the news release.
Also, Redfin San Francisco agent Chad Eng describes a housing market that feels “chaotic” in the absence of pre-pandemic norms.
“Due to COVID-19, agents are scheduling back-to-back 15-minute in-person home tours instead of holding traditional open houses. If you miss your appointment, you’re out of luck. Sellers often set a deadline for buyers to submit offers so they can review all of their options at once, but now that there’s so much uncertainty, sellers who receive one strong offer are less willing to wait around to see what else trickles in. I’ve seen multiple sellers accept an offer before the deadline, meaning buyers who wait miss out on their shot at buying the home,” he said in the news release.
With competition come rising home prices. The average sale price for the week ending July 5 was $310,000, up 7% from a year ago. Asking prices for newly listed homes continues to accelerate as well, rising 16% over the same week last year to $324,900.
To view the full report, including charts, outlook, and methodology, please visit here.