Home Prices Rise Despite Coronavirus Constrictions
By the Numbers
Although the US economy is facing a severe contraction due to fallout from the coronavirus, home prices are climbing around the country. According to the National Association of Realtors, the median price of a house in the US was $280,600 in March —up 8% from where it was in March a year ago.
During the Great Recession, house prices crashed and millions of families lost their homes. While some fear this could happen again when mortgage forbearances expire, most analysts expect this will not be the case. So far home prices have stayed strong despite job losses and business closures.
While the pandemic has caused demand to fall, and in-person open houses are virtually non-existent, something interesting is happening on the supply side as well.
Not only are people hesitant to list their homes during the uncertainty of the outbreak, but current sellers have been reluctant to reduce their prices because market conditions are so abnormal. In fact, during the week that ended April 25, only 4% of home sellers adjusted their listings lower.
Data from Redfin (RDFN), a real-estate brokerage, helps illustrate these dynamics. On one hand, its measure of homebuying demand was down 15% in the final week of April. Mortgage applications were also 20% lower from 2019 levels. On the flipside, total listings of homes for sale on the site hit a five-year low.
In essence, low inventory and limited supply—constraints that impacted the housing market prior to coronavirus—appear to be a constant factor even during the pandemic.
Even when the economy was booming, the housing market was still lopsided due to limited supply. In 2018, home construction per household was hovering at all-time lows. Now, the supply of homes for sale is contracting even more. Many people have decided not to move and sell their homes—both because of the cost of moving and because of the public health concerns that accompany open houses and hiring movers.
According to the National Association of Realtors, there were only 1.5 million homes for sale at the end of March—a 10.2% drop from what was on the market a year ago. Despite these numbers, most forecasts expect that house prices will not climb much higher. According to Zillow’s (ZG) predictions, prices will most likely fall 2% to 3% and then will recover by 2021.
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