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Some states are beginning to reopen their economies, while others are extending stay-at-home orders and business shutters. All this is creating an uneven trajectory for the nation’s housing market as it charts its rebound from the coronavirus-induced slowdown.
As buyers and sellers cautiously re-engage, here are five metrics – that update more frequently than lagging home sales and pending contracts – to watch in order to better gauge where the country’s housing market is headed.
Supply of new listings
When the COVID-19 pandemic hit two months ago, home sellers quickly retreated, suddenly stifling the supply of listings on the heels of a prolonged national shortage of for-sale residences.
In mid-April, tech-enabled real estate brokerage Redfin RDFN recorded the largest year-over-year slide of new listings – a little over 50%.
While new listings remain substantially lower than their level a year ago, the rate of their weekly decline has started to improve. For the week ending May 8, Redfin reported about 70,000 newly listed homes, which marked a 30% annual drop. This figure is in line with the findings of real estate listing site, Realtor.com. The latter recorded a decrease of 29% for the week ending May 9.
“New listings have increased every week for the past four weeks, but can’t keep up with demand,” Redfin Chief Growth Officer Adam Wiener said. “Sellers who can wait are still sitting on the sidelines.”
As a result, the supply of active listings fell 24% year-over-year to a little less than 700,000 homes nationally, the lowest number in five years, Redfin said.
Demand for homes
While supply continues to scrape a years-long bottom, demand from home shoppers has rebounded past its pre-coronavirus level, Wiener wrote on Thursday.
In the first full week of May, on a seasonally adjusted basis, home buying demand – as measured by the number of requests Redfin agents’ receive – stood 5.5% higher than it was in early 2020, before the pandemic.
While the overall real estate market might not chart a V-shaped recovery, demand sure seems to do so. The quick bounce-back is due to record-low mortgage rates, virtual home shopping solutions and the easing of local lock-down restrictions.
Also cuing to buyers’ return to the market are home loan applications, whose seasonally adjusted rate rose 0.3% week-over-week in the week ending May 8, according to a mortgage composite index by the Mortgage Bankers Association.
“There continues to be a stark recovery in purchase applications, as most large states saw increases in activity last week,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting. “We expect this positive purchase trend to continue – at varying rates across the country – as states gradually loosen social distancing measures, and some of the pent-up demand for housing returns in what is typically the final weeks of the spring home buying season.”
Time on the market
The fact that home shoppers are now resuming or commencing their searches, however, does not mean they are purchasing. According to the latest flash survey by the National Association of Realtors conducted earlier this week, 40% of the 3,000 agents who responded said that their clients are delaying their home purchase with “a couple of months.”
According to Realtor.com, the time properties spend on the market has grown by double digits year-over-year in the country’s largest 99 metros. For the week ending May 9, the national time-on-the-market metric rose by 13 days or 19% compared to a year ago. That is the biggest gap between the date homes are listed and the date they are sold since 2013, Realtor.com said.
Home prices
Even if abodes are spending longer on the market, asking prices remain in a positive territory.
Since the beginning of March, when it grew 4.4% on average year-over-year, the U.S. median listing price has plateaued to below-2% gains for about a month now. In the week ending May 9, it stood only 1.4% higher than a year ago.
Still, sellers are reluctant to reduce prices once they list. According to the NAR, 72% of real estate agents stated that sellers have not lowered prices. The majority of those who said that sellers have adjusted their ask reported a decrease of less than 5%.
At the same time, 58% of the surveyed agents said that buyers expect lower prices – mostly a decrease in the neighborhood of 5 – 10%.
While price gains are not growing as much and as fast as they did prior to the pandemic, Realtor.com notes that the mix of available homes is shifting toward pricier properties. If this remains a sustained dynamic, some home buyers might find themselves sidelined in a market with a yawning affordability gap.
Unemployment rate and jobless claims
The country’s unemployment rate and number of jobless claims – both of which are currently at record highs – have a sway over the housing market. If more Americans continue to lose their jobs or be furloughed, real estate dynamics would shift.
One the one hand, 18% of the agents the NAR surveyed said that their clients have suspended their home search over concerns about losing their jobs. On the other, if faced with the prospect of unemployment, sellers might opt for disparate approaches.
Some might decide to de-list their homes, expecting challenges in the search for their next abode. Others, however, might be pressed to sell as a means to access the liquidity in their residences and eliminate the burden of monthly mortgage outlays and other housing-related costs.