NAR: July 30, 2020: The recent flare-up in COVID cases hasn’t slowed the U.S. housing markets, according to the latest Pending Home Sales Index (PHSI) from the National Association of REALTORS® (NAR). For June, pending home sales increased 16.6 percent, marking the second consecutive month of increasing contract activity. The index is now at 116.1 on a national level—according to NAR, an index of 100 is equal to the level of contract activity in 2001.

All four major regions saw month-over-month growth in June. The Northeast, however, was the only region to not record YoY increases in pending transactions.

NAR revised its forecast for the remainder of 2020, expecting existing-home sales to decline by only 3 percent, with sales increasing to 5.6 million by the fourth quarter. In addition, NAR expects a positive GDP growth of 4 percent in 2021, which could help boost existing and new-home sales, forecasted to grow by 7 and 16 percent, respectively. In terms of mortgage interest rates, NAR predicts they will stay near 3 percent over the next 18 months, while home prices are forecast to increase by 4 percent in 2020 before moderating to 3 percent in 2021 with the addition of new supply.

Regional Breakdown: Northeast +54.4% MoM – Now 95.4 PHSI -0.9% YoY

Midwest +12.2% MoM – Now 110.9 PHSI +5.1% YoY

South +11.0% MoM – Now 140.3 PHSI +10.3% YoY

West +11.7% MoM – 99.6 PHSI +4.7% YoY Here’s What the Industry’s Saying: “It is quite surprising and remarkable that, in the midst of a global pandemic, contract activity for home purchases is higher compared to one year ago. Consumers are taking advantage of record-low mortgage rates resulting from the Federal Reserve’s maximum liquidity monetary policy. The Northeast’s strong bounce back comes after a lengthier lockdown, while the South has consistently outperformed the rest of the country. These remarkable rebounds speak to exceptionally high buyer demand. While the outlook is promising, sharply rising lumber prices are concerning. A reduction in tariffs—even if temporary—would help increase home building and thereby spur faster economic growth.” — Lawrence Yun, Chief Economist, National Association of REALTORS® “Pending home sales followed up their May rebound with another solid increase in June, as strong housing demand and low mortgage rates drive purchase activity. Pending sales were up over 6 percent compared to June 2019, which is consistent with the now 10 straight weeks of annual increases in home purchase applications we have reported. While this is another piece of positive news for the housing market, there is some uncertainty ahead. COVID-19 cases are rising in many parts of the country, the unemployment benefits extension remains in doubt, and housing inventory remains tight.” — Joel Kan, AVP of Economic and Industry Forecasting, Mortgage Bankers Association

“Housing market activity in June was strong, with buyers benefiting from extremely low mortgage rates that have continued declining all the way through July. Pending sales reflect contracts in June, which will close in July and August, and increasing sales in July are consistent with other data we are monitoring. Inventory has remained low, and we have seen new home sales pick up substantially as a result of pent-up demand and low levels of existing home inventory.

“The impacts of social distancing seem to have more lasting impacts on supply, as new listings remain well below the 2019 levels despite the resurgence of demand we saw in May and June. The dynamics created by pent-up demand and low levels of supply likely will result in an acceleration in price growth in July. If we see a further slowing in the pace of new listings coming on the market as a result of the recent surge in coronavirus cases, and mortgage rates continue to spur demand, we could continue to see upward pressure on home prices. It’s still not clear to what extent demand has been impacted in the second half of July by the case surge, but we expect to see some drop-off in demand as social distancing increases. Recent innovations that have made virtual tours straightforward and consumers adapting to fewer in-person showings are likely to reduce some of the impact of the surge.” — Ruben Gonzalez, Chief Economist, Keller Williams

Budged by historically low mortgage rates, existing-home sales sprang up 2.5 percent, according to the July National Association of REALTORS® report, released today. July’s sales totaled 5.42 million, an 0.6 percent bump year-over-year. 

In July, the average 30-year fixed mortgage rate was 3.77 percent, according to Freddie Mac, compared to 3.8 percent in June, and the average 4.54 percent in 2018. 

“Falling mortgage rates are improving housing affordability and nudging buyers into the market,” explains Lawrence Yun, chief economist at NAR. However, while “mortgage rates are important to consumers…so is confidence about the nation’s overall economic outlook. Home-buying is a serious long-term decision, and current low or even lower future mortgage rates may not in themselves meaningfully boost sales unless accompanied by improved consumer confidence.”

Challenges continue on the inventory side, as well, which could hinder progress, Yun says. According to NAR’s report, inventory in July slid to 1.89 million, down 1.6 percent year-over-year.

Additionally, in an analysis of 13 of the largest markets in the U.S., entry-level homes purchased in 2012 and sold in 2018 appreciated more than 100 percent in at least four: Atlanta, Denver, Miami and Tampa, according to NAR researchers. In that same time, higher-end home prices rose slower, compounding first-time homebuyer woes. “The shortage of lower-priced homes have markedly pushed up home prices,” says Yun. “Clearly, the inventory of moderately-priced homes is inadequate and more home-building is needed.”

Choices could open up this year, according to Yun, thanks to FHA’s finalizing of a new rule, which is anticipated to boost condominium inventory—a critical gateway for homebuyers. “Some new apartments could be converted into condominiums, thereby helping with the supply, especially in light of new federal rules permitting a wider use of Federal Housing Administration (FHA) mortgages to buy condo properties,” Yun says. “This change will begin benefiting buyers, sellers and our members as soon as this fall,” says NAR President John Smaby.

Across all house types (single-family, condo

, co-op and townhome), July’s median price was $280,800—a 4.3 percent increase year-over-year, NAR’s report reveals. The median price for sales in the single-family space was $284,000, while the condo median was $254,300. 

Currently, inventory is at a 4.2-month supply, the report shows. In July, the average listing was on the market for 29 days, two days longer than the prior year. Fifty-one percent of homes were on the market for less than one month.

Of July’s sales, 4.84 million were single-family—a climb from 4.71 million the month prior. Condo and co-op sales totaled 580,000, a 3.3 percent decrease year-over-year. Nineteen percent of sales were all-cash, and 11 percent by individual investors or second homebuyers. Two percent were distressed. First-time homebuyers comprised 32 percent of sales.

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After gaining ground in November and October, existing-home sales fell last month, dropping 6.4 percent to 4.99 million, the National Association of REALTORS® (NAR) reports. On an annual basis, sales toppled 10.3 percent.

Inventory month-to-month slid, as well, but has improved since last year, according to NAR. December inventory was 1.55 million, down from 1.74 million in November but up from 1.46 million in December 2017.

“The housing market is obviously very sensitive to mortgage rates,” says Lawrence Yun, chief economist at NAR. “Softer sales in December reflected consumer search processes and contract signing activity in previous months when mortgage rates were higher than today.”

Mortgage rates have recently reeled in, with the average 30-year fixed at 4.45 percent, according to Freddie Mac—an encouraging indicator for real estate this spring. “With mortgage rates lower, some revival in home sales is expected going into spring,” Yun says.

According to NAR President John Smaby, the government shutdown is also sowing uncertainty.

“The partial shutdown of the federal government has not had a significant effect on December closings, but the uncertainty of a shutdown has the potential to harm the market,” says Smaby. “Once the government is fully reopened, I am hopeful that housing transactions will increase.”

Across all house types (single-family, condo, co-op and townhome), the median price was $253,600, a 2.9 percent increase from the prior year, according to NAR. The median price in the single-family space was $255,200; the condo median was $240,600.

Activity disappointed in every major region of the U.S.:

Midwest Existing-Home Sales: 1.19 million (-10.5% YoY) Median Price: $191,300 (No Change)

Northeast Existing-Home Sales: 690,000 (-6.8% YoY) Median Price: $283,400 (+8.2% YoY)

South Existing-Home Sales: 2.09 million (-8.7% YoY) Median Price: $224,300 (+2.5% YoY)

West Existing-Home Sales: 1.02 million (-15% YoY) Median Price: $374,400 (+0.2% YoY)

Currently, inventory is at a 3.7-month supply, according to NAR. In December, existing-home sales averaged 46 days on market, six days longer than the prior year. Thirty-nine percent of homes were on the market for less than one month.

“Several consecutive months of rising inventory is a positive development for consumers and could lead to slower home price appreciation,” says Yun, “but there is still a lack of adequate inventory on the lower-priced points and too many in upper-priced points.”

Month-over-month, sales in the single-family space tumbled from 4.71 million to 4.45 million, and came in 10.1 percent lower than they were the prior year, when they totaled 4.95 million. Condo and co-op sales sank to 540,000—a 12.9 percent drop month-over-month and an 11.5 percent drop year-over-year. Twenty-two percent of sales were all-cash, and 13 percent by individual investors, according to NAR. Two percent were distressed. First-time homebuyers comprised 32 percent of sales.

The hottest markets, according to®’s Market Hotness Index, which is included in NAR’s report, were Chico, Calif.; Midland, Texas; Odessa, Texas; Columbus, Ohio; and Fort Wayne, Ind.

Source: NAR

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