Nobody could be faulted for believing that everything has come to a screeching halt during the coronavirus pandemic.
After all, the unemployment rate skyrocketed after
hitting a historic low in February. Many segments of the economy have been all but put out of business.
The cruise lines saw business drop to nearly nothing.
The airlines have only been buoyed by government
intervention and hotel chains and resorts have watched
as business has dried up.
With the exception of several tech stocks and consumer
goods stocks, the market has been hard hit. Beyond
these stocks, ETF’s, and mutual funds, there has been
one other segment of the economy that has remained
supercharged; sales of single-family homes.
The housing market has defied the pandemic and
rewarded sellers. The market hit a peak in August. Home
sales were up that month 24 percent over a year earlier.
According to the National Association of Realtors; the
index of pending home sales rose 8.8 percent in August.
One element of this surge, that is reflected in the
robust buying activity, is the historically low interest
rates on mortgages.
The increase in home sales has been broad-based
with increases seen across the country and especially
in the West.
A Hot Market with Limited Inventory
Another element creating the strong housing market
goes back to the old principle of supply and demand.
As supply narrows; prices rise. The inventory of available
homes in the pre-owned category has not kept up with
demand. This imbalance has helped sellers by allowing
them to increase selling prices.
Most homes for sale do not linger on the market for
very long and many fetch a selling price higher than
the seller originally hoped for because of multiple offers.
The average length of time that properties remained on the market in August was 22 days. This was down by
an average of nine days compared to August of 2019.
More than two-thirds of homes, sold in August, were on
the market for less than a month. The lack of inventory
continued to drop during the late summer. The total
number of available homes in August was 1.49 million;
a drop of 18.6 percent over the year-ago number.
There has been a shortage of inventory of new homes
as well because of an increase in lumber prices which is
a result of the wildfires in the Western states. From April
to late September, lumber prices were up 170 percent.
Some real estate experts believe that part of the run on
real estate in August was because of pent-up demand
left over from the spring, when the pandemic kept many buyers from actively looking at homes because of stay-athome orders and other mitigation restrictions.
The pandemic has also changed real estate buying behavior
and increased resources used online. It has also highlighted
the value of having extra space for working from home
or studying from home and has driven many Millennials
to seek out single-family homes that meet the criteria for
these activities.
Those Millennials will continue to drive the market,
along with low interest rates, making the pandemic just
a challenge to work around as home sales remain strong.