Homes Are Selling Faster and Prices Are Rising

Homes Are Selling Faster and Prices Are Rising.

This isn’t what anyone might have predicted for the Real Estate market during a pandemic. A lingering nationwide lack of inventory, worsened by Covid 19, is clearly responsible behind the scenes. But even though demand experienced the anticipated drop-off at the onset of the quarantine, it proved to be a temporary setback. After a slight hiccup, Home Buyers have returned to the market in full force. Home Sellers have not.

So how is inventory driving our market? It’s the age-old headache of supply and demand. Nearly every client I’ve worked with this year, has experienced the disappointment and frustration of competing bids. This motivates potential buyers to raise their offers, resulting in a final sales price that is frequently higher than the original list price. Good for Sellers, not so great for Buyers. Of course the bank that will be financing the home must confirm it’s value with an appraisal, but there are ways around that too. A cash offer does not require an appraisal. Though I would strongly caution anyone buying a home to obtain an appraisal, it’s not a deal breaker for a cash buyer. A larger down payment can make a home buyer’s offer infinitely more attractive because the bank will be financing a smaller percentage of value. Naturally there are numerous components that impact a home’s purchase price but it is by far, the appraisal that carries the most weight. Common wisdom among Realtors seems to be that multiple offers on homes for sale will be the norm for at least the foreseeable future.

Here in the Greater Phoenix Valley, we have also detected a subtle migration toward smaller suburbs and more outlying areas. What it appears to boil down to also relates to the pandemic. More people working from home, necessitates more space and more privacy. The closer you get to a major metropolitan area, the pricier the real estate. Hence a shift in priorities. What used to be a demand for convenience and a quick commute, is slowly becoming a desire for square footage and separation.

Time-on-market is likewise being affected. Home Sellers are experiencing far more showings in a shorter period of time, and timetables for listing to close are much shorter. Current low mortgage interest rates are showing no indication of climbing. Home builder confidence is at a record high, indicating an increase in demand for new construction. I think it’s possible that at the end of the year we could still be saying ‘Homes are Selling Faster and Prices are Rising”.

RIS Media shows us the data below.

Despite the challenges to the market presented by the coronavirus pandemic, things are looking up. According to Zillow’s Weekly Market Report for the week ending August 8, newly pending sales are up nearly 17 percent year-over-year, and price growth is accelerating.

Although more new listings were added to the market last week than the week prior, buyers are still confronting an inventory shortage as the number of available homes on the market isn’t enough to keep up with the pace of sales. Total inventory has fallen further below where it was last year, while strong buyer demand persists in both urban and suburban areas of the country during the coronavirus pandemic.

The positive indicators for home sales include:

Newly pending sales rose 1.3 percent from the previous week, and are now up 16.9 percent year-over-year.
Homes sold last week typically went under contract after 13 days, which is 11 days faster than during the same period last year and a new record low in Zillow data that dates back to the start of 2019.
Fast-moving large markets, such as Cincinnati, Columbus, Kansas City and Raleigh, saw sellers typically accept an offer after their homes were on the market only four days.

The challenges for inventory can be seen in the following stats:

There were 4.3 percent more new for-sale listings added to the market than the week prior.
Still, new listings are 13.2 percent lower than a year ago. And total inventory slipped further, now down 27.6 percent year-over-year.

Price increases are reflected in the following indicators:

The median list price in the U.S. last week was $344,660, up 7.3 percent year-over-year. In early May, list prices were up 1.1 percent annually.
In the week ending June 27, the median sale price in the U.S. was $269,700, 1.8 percent higher than the same period a year earlier. Year-over-year sale price growth slowed throughout May but is climbing again, up from 0.7 percent from two weeks earlier.

Finally, despite news of an urban migration as people opt for suburbs over cities due to coronavirus, Zillow reports that urban and suburban housing markets across the U.S. have shown similar strength in key housing indicators since the beginning of the coronavirus pandemic, save for Manhattan and San Francisco.
Reprinted with permission from RISMedia. ©2020. All rights reserved.