The coronavirus outbreak has fundamentally reshaped the real estate industry, raising a host of novel issues for the housing market and forcing professionals and consumers alike to adapt their approaches to buying and selling property. The ongoing and dynamic COVID-19 situation continues to influence the manner in which individuals interact with each other and conduct business on a daily basis. Amidst the resultant increase in uncertainty, both in the U.S. and abroad, we feel that it is more essential now than ever to be able to share our professional insights as it relates to the real estate industry.
Recently, we passed exactly one year since the World Health Organization (WHO) declared COVID-19 an official pandemic. Presently, the housing market has demonstrated its historical resiliency yet again, as evidenced by the realtor.com Market Recovery Index peaking at 101.6 points on a national basis last week—nearly 1.6 points higher than pre-pandemic levels. The index is a useful tool in gauging the status of the collective real estate industry. The overall index is set to 100 for the final week of January based on average year-over year trends that month and updated on a weekly basis relative to that initial baseline. Thus, a value of 100 means the market has recovered to January 2020 levels. The higher the index value, the higher the level of recovery and vice versa. By using a proprietary combination of data points to include housing demand, supply, average prices and transaction rates, the weekly index offers a timely and localized overview on the recovery status relative to just before the COVID-19 pandemic took effect.
After the governmental announcement of the pandemic in early 2020, the rate of property transactions slowed dramatically, as efforts to stem the spread of the virus severely impeded the traditional home buying and selling processes alike. Sellers put their plans to list their homes on pause and newly listed homes took a 47% nosedive on a year-over-year basis. With the decrease in buyer demand, properties that were already on the market lingered and the days on market average spiked 30% higher than the preceding year. However, during the summer of 2020, the economy started a gradual recovery after initially tanking, and as legislators started to take a more informed approach to dealing with COVID-19, social distancing measures became more specified and less restrictive—allowing the real estate industry to start conducting business on a more regular and predictable basis. The rate of homebuyer demand once again returned, aided by historically low interest rates and the ability to move to bigger, more affordable housing options due to the rise in teleworking opportunities. Online home buyers also heavily utilized remote features including virtual and 3D tours in place of in-person visits. By May 2020, the amount of shoppers using online real estate services rose 37% over2019 levels that resulted in a surprisingly active fall and winter market.
Looking forward to the coming spring and summer months, a rise in the amount of newly listed homes and a strong homebuyer demand has created a tight, fast-paced housing market with median home listing prices consistently growing well over last year’s totals. Although interest rates have risen somewhat in the recent weeks that has seen a decrease in mortgage applications, industry experts still anticipate an active marketplace as the weather warms up—especially if more sellers and new construction projects can improve the inventory shortfall in the coming months. Homes are also selling more quickly than they were at this time last year. The average property for sale lingered for around 70 days on the market this year as opposed to 82 last year. In the 50 largest U.S. metropolitan areas, the typical home spent 48 days on the market, 12 days fewer than last year. These numbers suggest an active and healthy market that is primed for growth over the course of 2021 as the COVID-19 situation continues to improve in light of the vaccine.