Those hoping the coronavirus-fueled recession will bring another round of bargain-basement real estate prices are likely out of luck.
Even with the pandemic raging, a battered economy, and the highest unemployment since the Great Depression, median home list prices still jumped up 3.1% year over year last week, according to the most recent realtor.com® data of the seven days ending May 23. That’s about double the 1.5% annual rise from the previous week ending May 16.
Last week, home prices increased in about three-quarters, 77, of the largest U.S. metropolitan areas.
“There are still buyers in the market,” says realtor.com® Senior Economist George Ratiu. “But given the very limited number of properties available, buyers are willing to pay more.”
Just before the pandemic plunged the U.S. into catastrophe mode, home prices were increasing about 4.4% annually in the first two weeks of March.
Prices generally heat up in the late spring and into summer, but this time it’s likely due to modestly priced homes fetching higher prices and more expensive properties sitting on the market longer.
“The mix of homes that are on the market now is a little bit different,” says Ratiu. “What’s really selling at a premium are lower-priced homes. The higher-priced homes are sitting on the market longer.”
The number of listings was down 22% year over year in the week ending May 23. That’s because many sellers pulled their properties off the market or held off on listing as they didn’t want strangers walking through their homes in the middle of a public health disaster. When there are more buyers competing for a very limited supply of properties, prices tend to go up.
Meanwhile, the number of new listings fell about 20% annually. While that sounds bad—and it is—it’s much better than the 28% drop the week prior. The improvement is likely due to sellers becoming a tad more comfortable listing their properties as more cities and states loosen restrictions and open up.
While more supply could help prices to eventually soften, record-low mortgage interest rates have given them a little more room to rise. They can help alleviate some of the financial pressure of those higher prices as they can help to reduce the size of homeowners’ monthly housing payments. Rates fell to 3.08% on 30-year fixed-rate loans, according to Mortgage News Daily.
“If you have to move, these really low mortgage rates are really an incentive,” says Ratiu. “They can even offset a slightly higher price.”
The one bit of good news for buyers is they may have more time to shop around. (Sorry, sellers.) The number of days that homes sat on the market was 16 fewer than in the same week a year ago. In the first two weeks of March, homes were selling four days faster than the previous year.
“Homes that have been sitting on the market longer are good opportunities for negotiation,” says Ratiu. “If buyers are not in a hurry, being patient is likely to pay off because we do expect more homes to go up for sale in the next few months.”