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.

Supply Constraints

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.

Looking Ahead

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.

Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Advisor
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.

All your finances.
All in one app.

SoFi QR code, Download now, scan this with your phone’s camera

All your finances.
All in one app.

App Store rating

SoFi iOS App, Download on the App Store SoFi Android App, Get it on Google Play

ABOUT SoFi SoFi helps people achieve financial independence to realize their ambitions. Our products for borrowing, saving, spending, investing, and protecting give our more than one million members fast access to tools to get their money right. SoFi membership comes with the key essentials for getting ahead, including career advisors and connection to a thriving community of like-minded, ambitious people. For more information, visit SoFi.com. Want an easy and convenient way to manage your financial life? Get the SoFi app. For iOS and Android.

TLS 1.2 Encrypted
Equal Housing Lender