The start of 2020 put California’s housing market into a massive slump. The pandemic led to strict stay-at-home orders enforced throughout the state. This nearly froze the housing market.
At the start of the summer, however, the market started heating up. Buyer demand began to rise, sales were beginning to rise, and more homeowners found it a good time to sell. This sudden change was one of the largest monthly surges in almost 40 years!
The question people are asking is how long will it last? Will housing prices continue to rise the rest of this year? Or is it too good to be true?
Are you curious about how buyer demand is impacting the housing market this year? Here’s everything you need to know for September and the Fall of 2020!
Housing Prices During the Pandemic
During the start of the pandemic, the housing market continued but at a much slower pace. Many buyers and sellers decided to wait to buy and sell for a later time when pandemic restrictions loosened.
Those who did buy during this time saw record-low mortgage rates. The pandemic caused mortgage rates to drop as low as 3.29% for a 30-year mortgage, a low not seen in over 50 years!
Despite home buyers experiencing these low mortgage rates, housing prices are rising due to limited housing availability. Those looking to buy have a very limited selection of available homes at higher prices. Many buyers are waiting with anticipation for more sellers to start hitting the market.
A limited selection has lead to an increase in prices. While this is generally a normal trend from year-to-year, it was more noticeable in 2020. In May of 2019, the median house cost in the United States was around $278,200 which grew about 2.3% by May of 2020.
For about 3 continuous months, housing sales declined. It wasn’t until June that the housing market finally hit a turnaround point.
Home sales, particularly existing homes, have spiked. From May to June of 2020, there was an increase of around 20% in home sales which include condominiums, townhomes, and single-family homes. This is in part due to growing buyer demand and fewer available homes.
While many buyers and sellers are enjoying the current recovering market, many are wondering about what the Fall will bring. There have been second and third waves of the pandemic affecting different parts of the globe. What will the housing market look like for the rest of 2020?
Is the Housing Market Recovering?
June has shown a lot of promise in regards to a recovering housing market. Housing sales all over the country are rising and are continuing to rise during the summer.
The East and West coasts are leading the recovery process showing greater sales than before the pandemic in March. The end of July showed a rise in not only sales but demand and price as well.
Is Buyer Demand Still Growing?
The buyer demand is continuing to grow as we enter September. By the end of July, the demand index was almost 17 points above that of January. Professionals calculate this number by tracking search activity online.
Some find this surprising as house prices are rising and the inventory remains low. With rock-bottom mortgage prices, many homebuyers have the right idea. Some home sellers, however, are still waiting before putting their homes on the market.
Researchers believe buyer demand will continue to grow throughout the Fall of 2020. The biggest challenge sellers are facing is they’re also buyers.
The growing buyer demand and limited inventory make finding a new house a challenging process. Potential sellers are finding it much easier to refinance and renovate their current home than to find something better.
Other issues sellers are facing is health and safety during the coronavirus along with potential job loss in the current economy.
It’s likely the buyer demand will eventually start to fade by the end of the year. It will, however, remain strong compared to the Spring. Millennial buyers are making up a huge part of the buyer demand as they search for homes.
Will the home buyer demand be sustainable throughout the rest of the year? The resonating answer is no as the major surge in demand this Summer had built up over the course of a slow Spring.
Why Housing Prices are Rising
Like buyer demand, housing prices are also rising. Compared to the median home price in January, homes this September are about 5.5 points above January prices.
What’s causing this rise in house prices? The main 2 factors influencing home prices are a record low housing supply and a growing buyer demand. The few sellers on the market feel more confident asking for more as they’re likelier to make a sale with such a large demand.
Typically during an economic downfall like this one, housing prices tend to remain stagnant or grow at a much slower rate. This year has been an exception as housing prices are accelerating throughout the summer.
This trend may stall later this year and early into next year. Future economic impacts may grow this Fall and slow down the rate of buyer demand and housing prices. Despite this, many believe housing prices will continue to rise the rest of the year but at a much slower rate.
Changes in Home Sales
Home sales are increasing this Summer and should continue into the Fall. Since May, home sales have risen monthly by 16.6%. There has also been an increase this year of 6.3% since June of 2019.
Most buyers are looking for affordability and more space. The combination of stay-at-home orders, work from home, and homeschooling is driving people to look for more spacious homes. Of course, this is a challenge with such a limited inventory of available homes.
Houses are spending shorter amounts of time on the market compared to a year ago. Many believe buyers and sellers are connecting and finalizing sales faster than before.
Is Housing Supply Increasing?
Since this Spring, the housing supply is slowly increasing. Compared to years before, however, the supply is growing at a much slower rate than in January. More sellers are re-entering the housing market but with a greater amount of caution due to economic uncertainties.
An unfortunate trend that began in May was an increase in buyers backing out of deals and sellers pulling their homes out of the market. The uncertainty of second or third waves of the virus has put many buyers and sellers on edge.
Other potential sellers believe their homes are unlikely to sell due to social distancing. Some are unwilling to show their homes in person and others are waiting until the pandemic passes.
The reopening of the United State’s economy plays a key role in the housing supply. The current trend is an increase in housing supply but this may change throughout the Fall and Winter months.
Housing Market Predictions for 2021
The overall number of home sales in 2020 is likely to be significantly less than the year before. More houses will sell this Fall but the sales rate will drop to those not seen since 1991.
Many experts believe the economic cost of the pandemic will continue to burden the economy in 2021. The projections for the 2021 housing market have also lowered from 6.3 million to 6 million.
A few predictions for the rest of 2020 and into 2021 include:
- Housing prices will slow and flatten
- Mortgage prices will continue to stay at record lows
- Housing availability will remain lower than normal but will start rising this Fall
- Buyers are looking for affordability and more space
- Buyer and seller confidence is low due to uncertainties in the job market
The unforeseen health crisis and economic impacts will continue to influence buyer demand and supply. Some of the largest metro areas in California and throughout the United States have seen started seeing a slight decline in housing listings this summer. Fortunately, many researchers believe there will be another bump late this summer and into early Fall.
The affordability of houses is an ongoing struggle and will continue to be a challenge as prices rise. Before the COVID-19 pandemic, Millennial buyers were toiling to find houses that fit their budget.
Unfortunately, housing prices will continue to rise for the rest of 2020. Homebuilders are focusing on high-end luxury homes over affordable homes thus raising the price of available homes.
The Housing Market is Looking Up
Since the lull in early Spring, the housing market is looking up. The pandemic is beginning to slow, giving the economy a chance to reopen. Uncertainties still exist but buyer demand continues as the housing market is making a comeback.
If you’re looking to buy or sell a home this year, now is the time. Buyers can enjoy all-time low mortgages. Sellers can benefit from selling their homes at higher prices and potentially a faster rate than before the pandemic.
Are you looking for a home or planning to list yours? Let’s connect and we’ll help you through every step of the home-buying and selling process!
