The year has seen a global pandemic, social unrest, a divisive presidential election and, surprisingly, a booming real estate market despite it all.
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Home sales and prices have substantially increased this year, and properties are spending less time on the market, even compared with 2019, before the COVID-19 pandemic.
“That is a big surprise,” said Lawrence Yun, chief economist at the National Association of Realtors.
Yun pointed to financial factors as the first reason for the market’s growth. Mortgage rates have repeatedly hit record lows this year, according to data from Freddie Mac, a company set up by Congress to buoy homeownership.
“The mortgage rate falling to record lows was simply too good to give up for many people,” he said.
As of October – the most recent data available – existing-home sales saw their fifth consecutive month of growth, according to the National Association of Realtors. The median home price was up nearly 16% year-over-year at $313,000.
Meanwhile, housing inventory fell 19.8% from a year earlier to just 1.42 million units, according to the Realtors group. And 72% of homes that sold in October had been on the market for less than a month.
“Home sales are up, the highest since 2006,” Yun said. “We’re talking about in a year of pandemic, a year of unemployment, and then you have home prices rising to record-high levels with the price appreciation too strong, meaning it’s outpacing people’s income growth by a large margin.”
With strong demand, the scarce inventory is helping drive prices higher – good for sellers, but not for potential first-time buyers.
“Homeowners are smiling big with this price appreciation,” Yun said. “Maybe on the opposite side of the coin, the renters who want to be a homeowner see the low mortgage rates, but then they see a sticker shock, home prices being so expensive or there are multiple competitors, multiple bids on a home for sale.”
Another factor behind the growth is the change in circumstances the pandemic has brought for many Americans. There are people who are working from home and have their children learning from home, meaning they need more space.
That has especially driven growth in areas where people were more likely to travel for vacations than to live full-time. Vacation home sales from July through September increased 44% from the same period last year, according to the association.
“Working from home, what the heck, you can work from a vacation home,” Yun said. “Why would the boss know or care? So we have seen sales growth be stronger in vacation counties compared to more normal counties.”
That trend has carried out in all kinds of vacation destinations, from beach towns to lakeside getaways to ski resorts that have become popular for year-round recreation.
And single-family homes are the most popular type of vacation property in 2020 as buyers look to avoid shared spaces, according to Yun.
“I believe people are treating home as something far greater than they used to – a place to work, possibly an additional place to have space for kids, education,” Yun said. “So, people are viewing their home as something far more special now than before, and the housing market just took off in 2020.”