Despite recording over 22 million job losses, the US is reporting a steady rise in home prices and a sustained drop in supply. According to research data released in mid-August 2020 that was analyzed and published by ForexSchoolOnline.com, home prices in the United States rose by 8.1% year-on-year (YoY) between August 2019 and end of July 2020.
During the first seven months of 2020, the monthly annualized increase rate was 7.8%. For the second quarter of 2020, the annualized rate of increase was 6.6%. Housing demand during the quarter went from -41% to +40% YoY. Such a massive bounce had never been witnessed before in the housing market.
In the last week of June, the number of closed deals in real estate sales surpassed that of the same period in 2019. This was the first time since the end of March that the number of weekly closings in 2020 exceeded those of 2019.
In the UK, the housing market is on a rebound following the massive losses reported during lockdown. Prices rose by 2% in August 2020, increasing the average to £224,123. The increase was the highest on record since February 2004 when there was a 2.7% jump in price. It raised the annual growth in house price from 1.5% in July to 3.7% according to The Nationwide.
Among the range of factors causing the increase was pent-up demand from the lockdown period. Furthermore, there was a temporary ‘stamp duty holiday’ for certain homes in Northern Ireland and England.
In view of the situation, the biggest housebuilder in the UK, Barrat, reported a pre-tax profit drop of -46% YTD for the period that ended in June 30, 2020. With building sites remaining closed for weeks, it also reported a 29% YoY drop in completed homes during the period. All in all, it completed 5,252 fewer homes in January to June 2020 than during the same period in 2019.
Median Home Price Surpasses $300K for the First Time
The third quarter of 2020 started out on a high note with the national median home price surpassing the $300,000 mark for the first time ever. The new median price of $304,100 reported in July was around 12% higher than the previous peak recorded more than a decade ago. It marked an increase of 8.5% from the July 2019 median price of $280,400.
This price increase came following 101 straight months of consistent YoY gains. In June 2020, the median price was $295,300, an increase of 3.5% from June 2019. The gain in May was 2.3% YoY, from $278,200 in May 2019 to $284,600.
Notably, the median price for single-family homes in July was $307,800, up by 8.5% YoY. On the other hand, the median price for existing condos was $270,100, up by 6.4% YoY. The high median price for single-family homes has to do with demand.
According to estimates from the Department of Housing and Urban Development and the US Census Bureau, the seasonally adjusted annual sales rate for these homes was 901,000 in July 2020. Considering that the June rate was 791,000, this was a 13.9% increase. Compared to the July 2019 rate of 661,000, it marked an increase of 36.3% YoY.
11% Drop in New House Listings, 36% Drop in Total Inventory
Among the reasons cited for this growth, despite the uncertainty occasioned by the pandemic, is a drop in mortgage rates. Toward the end of June 2020, according to Marketwatch, 30-year fixed mortgage rates dropped to 2.98%, a record low.
Not only have the rates gone down to record lows, but there is also a shortage of inventory. Housing units were in short supply considering that in the last week of August, unsold inventory was at 3.1 months supply based on the pace of sales at the time. This was a significant drop from the June figure of 3.9 months and the July figure of 4.2 months. The August figure signaled a seller’s market in real estate.
Data released by Realtor.com in August 2020 revealed a growth of median listing prices at 10.1% YoY, marking the fastest rate of growth since January 2018. However, new listings had dropped -11% YoY and total inventory had dropped -36% YoY.
Another possible reason for the growth in the US housing market has to do with buying power. According to the US Census Bureau, households earning below $35,000 a year are the ones that have been hit the hardest with regards to lost wages. But the National Association of Realtors points out that the median income for home buyers is around $93,000 a year.