Home prices in the pandemic: dig deeper into the data

In the early days of the COVID-19 pandemic, we were faced with a world of unknowns. Lockdowns across the country created lack of access to homes for showings, inspections, and appraisals. Unemployment numbers spiked precipitously, reaching nearly 15% in April. Economists predicted that home prices would decline 3-10% over the coming year.

Sure enough, the United States saw a slump in the spring homebuying season from April through June. Yet, as much of the country continued fighting COVID-19 throughout the summer, the housing market began an aggressive recovery. In the six months since the start of the pandemic, home prices have risen at an annualized rate of 6.9%, according to September 2020 data from the Radian Home Price Index.

The Radian Home Price Index, provided by Radian’s subsidiary Red Bell Real Estate, LLC, is the most comprehensive and timely measure of U.S. housing market prices and conditions. The index is calculated based on the estimated values of more than 70 million unique addresses each month, covering all single-family property types and geographies. Digging deeper into the data, we can see a number of interesting trends.

A tale of three quarters

At the current pace, 2020 is poised to have a larger sales market than 2019—despite taking a beating in the spring. So, what is fueling this rapid recovery?

Supply and demand dynamics

Strong demand and low supply continue to put upward pressure on home prices. Days-on-market hit record lows in the last few months for both active listings and homes sold. Additionally, mortgage rates have been hovering at historic lows—under 3%—for weeks. Finally, home demand is benefiting from a shift out of big cities and into suburban areas, where there are more single-family homes.

High quality lending

While many people initially saw the economic impact of COVID-19 as a parallel to the great recession, today’s lending environment is barely recognizable compared to that of 2008. The quality of mortgage products, underwriting, and servicing standards has improved dramatically over the past decade through regulatory reform and improved business practices, which is helping ensure sustainable home ownership.

Government intervention

Congress swiftly passed the CARES Act in March 2020, which along with housing agencies has provided mortgage forbearance and unemployment benefits to people affected by the pandemic. This meant that when nearly 15% of Americans lost their jobs in April, homeowners were protected from default, foreclosure and eviction.

There are also good reasons to believe that other factors will further support home price appreciation throughout the fall. For one, the Federal Reserve recently signaled that interest rates will remain low through 2023, and the housing agencies have extended forbearance and foreclosure moratoriums until into 2021. Finally, the upcoming presidential election means there will likely not be any adverse changes in housing policy until at least the new year.

While no one can say for certain what the long-term impacts of the pandemic will be, we can certainly say it has taken the housing market on a wild ride this year.

Red Bell Real Estate, LLC, a subsidiary of Radian Group Inc., provides national and regional indices for download at info.radian.com/hpi, along with information on how to access the full library of indices.

In addition to the services offered by its Red Bell subsidiary, Radian is ensuring the American dream of homeownership responsibly and sustainably through products and services that include industry-leading mortgage insurance and a comprehensive suite of mortgage, risk, title, valuation, asset management and other real estate services. We are powered by technology, informed by data and driven to deliver new and better ways to transact and manage risk. Visit radian.com to learn more about how Radian is shaping the future of mortgage and real estate services.

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