Housing recovery slips away, again
Wednesday, March 25, 2020
Given the ups and downs of recent years, any prognosis about the state of the U.S. housing market is risky. Still, emerging data from the month of February suggests that the industry may have experienced the beginning of an upward trend going into spring, traditionally the busiest homebuying season of the year.
Now, however, the oft-predicted recovery yet again will have to wait a while longer — perhaps much longer — as the country wrestles with the challenges created by the COVID-19 pandemic.
Low interest rates and an increase in household income due to rising wages and continued job growth, along with unseasonably warmer weather, unleashed more prospective buyers into the market. Fannie Mae announced its Home Purchase Sentiment Index (HPSI) in February remained near its all-time high, with a slight decline in the proportion of respondents saying now is a good time to buy because of a concern over ever-rising home prices.
After a lackluster January, sales of existing homes jumped 6.5% in February, up 7.2% from the year before. Total sales exceeded 5 million, the strongest level since February of 2007, according to the National Association of Realtors (NAR). Sales of single-family homes rose nearly 7.3% (up 7.3% year-over-year, as well), while condo sales growth remained flat.
Similarly, RE/MAX related that average home sales in the 53 metro areas it tracks leapt 7.4% in February compared to January, up 7.5% from the previous year. However, its analysis also pointed to almost 16% drop in inventory year-over-year, the fourth consecutive month of double-digit declines, which could be an indication that activity would have decelerated in March, all else being equal.
Having hit a 13-year high in January (soaring around 19% from the previous January), sales of newly-constructed single-family homes fell back 4.4% in February, according to U.S. Census Bureau early estimates. Nonetheless, the number of units sold was 14.3% higher than in February 2019.
The Mortgage Bankers Association (MBA) reports mortgage applications for new home purchases in February increased 25.9% compared from a year ago, but just 1% for the month. Despite the high demand for mortgages, the MBA estimates an almost 14% month-to-month decrease in single-family new home sales in February, based on the results of its monthly Builder Application Survey (BAS).
Median home prices, though still higher year-over-year, decreased somewhat for the month of February, perhaps due to an increase in first-time buyers. The median price of all existing homes sold was around $16,000 less than in January, although the price of a single-family home was down less than $2,000. The median price for a newly constructed single-family home dropped $3,000, but the average price stayed about the same.
These figures predate the impact of the coronavirus pandemic in the United States. March’s numbers are expected to be much lower and April’s most likely lower still as more businesses slow down or close and people are confined to their homes.
All the same, January and February’s strong numbers indicate that demand for home ownership remains high. If market conditions remain favorable once the economy revives and stabilizes, the industry could see a surge in activity in the latter part of the year. In the meantime, sellers and their agents are using online virtual tours, conferencing tools and social media to attract whatever buyers they can.
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