- The hottest pandemic purchase is a house, as more and more Americans take advantage of low mortgage rates to attain spacious backyards and more comfortable work-from-home locales.
- Existing home sales, which have trended upward for the last 3 months since the housing market reopened from shutdown, soared to a 14-year high in August. New home sales are also up.
- Home prices are soaring, too, recording the highest two-month appreciation between May and July — at 2% — in 30 years of record-keeping.
- But not enough new houses are being built to keep up with demand, a trend that actually goes back a decade.
- Homebuying, in all its trendy glory, only projects to get more expensive, if not impossible. If homes keep selling at this rate, Bloomberg estimates the inventory of new homes could actually run out in just a few months.
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Have you thought about moving amid the coronavirus pandemic?
Is your Instagram feed littered with captions reading “Surprise! We bought a house!” underneath photos of couples posing with sets of keys and whimsically colored front doors? Have you seen unbearably long lines for open houses in your own neighborhood?
If it seems like the hottest pandemic purchase is a home, well, it’s not just your hunch telling you that.
A shocking volume of homes are selling rapidly, according to new data. The National Association of Realtors (NAR) released a report on Tuesday finding that existing home sales reached a 14-year high in August. In fact, Bloomberg reported that if homes continue to sell at their current rate, the US would run out of home inventory in just over three months.
Meanwhile, most newly minted homeowners already regret their decision, survey data shows.
Buying a home right now isn’t nearly as affordable as low mortgage rates promise, with low supply continually ratcheting home prices up. And it’s only going to become more expensive, potentially dashing future homeowners’ dreams.
Houses are selling at an almost unbelievable rate
August was the third straight month that existing home sales trended upward, per NAR. It also found that roughly 6 million homes were sold at a seasonally adjusted annual rate in that month —the highest annualized sales rate since 2006. The figure also represents a 10.5% year-over-year increase.
New home sales have trended upward recently, too. Bloomberg reported that sales of new construction jumped to 342,000 in August — also a high mark since 2006.
Those interested in buying new digs, or the perks that accompany the purchase like spacious backyards and comfortable work-from-home locales, are willing to pay more than ever before.
“Buyers are willing to pay more for a house than I’ve ever seen — I’m talking $30,000 to $50,000 over the listing price,” one Baltimore real estate agent told Redfin recently. “They’re desperate because homes are flying off the market so quickly. I’m selling all of the homes I’m listing within three days.”
The eagerness to buy a home is also fueled by low mortgage rates — mortgage applications are up 22% compared to last year. Mortgage rates now are among the lowest ever offered — US 30-year mortgage rates have hit nine record lows in 2020 alone.
But home prices are skyrocketing and homebuying is only expected to get harder
Those low mortgage rates, along with the urge to find shelter during the pandemic, seem to have brought so many homebuyers into a market where bargains are hard to find. Redfin found that as of the end of July, lower mortgage rates had given buyers an extra 6.9% in purchasing power, but house prices were up 8.2% year-over-year at that point — and they’ve kept going up since.
In fact, the 2% appreciation in national home prices between May and July was the biggest two-month jump since at least 1991, which was when the Federal Housing Finance Authority started tracking those changes in an index.
Those who already own homes are holding off on selling, according to Zillow economists, meaning there are fewer homes on the market than normal. There are 20% fewer houses for sale now than there were at this time last year. Uncertainty about employment and the economy among other financial concerns may keep housing supply low for some time, and is exacerbated by the US’ failure to keep up with home building needs over the past decade.
Even though record-high numbers of newbuilds were purchased earlier in the pandemic, new-construction listings dropped 33.6% year-over-year in August, according to a Redfin analysis, meaning that not enough homes are being built to keep up with demand.
“Housing demand is robust but supply is not and this imbalance will inevitably harm affordability and hinder ownership opportunities,” NAR’s chief economist, Lawrence Yun, said in the association’s report.
We’re already seeing the effects of this — the FHFA reported that home prices jumped 6.5% nationally in July on a year-over-year basis. Separately, NAR found that the national median home price in August was $310,600, up 11.4% from last August.
Median home prices of single-family homes and condos are currently less affordable than historical averages in roughly two-thirds of the US, according to a Thursday Attom Data Solutions report.
“In a year when nothing is normal, owning a single-family home has become less affordable to average wage earners across the US, despite conditions that would seem to point the opposite way,” Todd Teta, Attom’s chief product officer said in the report, noting that higher wages and lower mortgage rates “should work in favor of home buyers.” The report went on to note that home price appreciation outpaced average weekly wage growth in most — 87% — of the country this month.
Meanwhile, as prices rise due to demand, mortgages are becoming even harder to come by. Lenders are tightening standards due to the coronavirus recession, per the Mortgage Bankers Association. It reportedly hasn’t been this hard to take out a mortgage since 2014.
The unfortunate combination is enough to make homeownership simply unattainable for the average American as the pandemic wears on.
Newly minted homeowners are already regretting their decision, too. A late August LendEDU survey found that more than half of Americans — a whopping 55% — who purchased homes amid the pandemic almost immediately reported buyer’s remorse. Roughly 30% of those respondents cited financial reasons.