As Americans emerged from their shelter-in-place COVID captivity in recent weeks, a lot of them headed right back to the housing market, which had been on a multi-year run when 2019 ended.
The Mortgage Bankers Association reported that purchase applications for mortgages continued their recent ascent during the week ending May 29, increasing 5% over the prior week and 18% compared with the same period in 2019. This was the seventh straight week of rising demand.
Tech-driven real estate broker Redfin, which is active in 90 markets in the United States and Canada, reported that it was seeing homebuying moving into growth mode. “For the seven days ended May 17, demand was 16.5% higher than it was before the pandemic, on a seasonally-adjusted basis, according to Redfin.
“The pent-up demand from homebuyers returning to the market continues to support a recovery from the weekly declines observed earlier this spring,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. But he cautioned that high unemployment and low housing supply may restrain a continued increase in purchase applications.
As the pandemic took hold, the inventory of homes for sale fell along with demand as sellers delisted, and home prices held fairly steady, according to Housing Wire. But by April, buyers had wised up. New homes sold in April at a median price of $309,900, down 8.6% from a year earlier and down 5.2% from the March median selling price of $326,900, according to the U.S. Census Bureau.
Buyers bidding up prices
In May, however, market dynamics shifted again as more buyers bid on what is still a limited supply of homes.
According to a Bloomberg article, Redfin calculated that roughly 40% of home buyers its agents worked with recently faced competition when they tried to purchase a home. The rate was even higher in cities like San Francisco and Boston, where more than 60% of properties the company’s clients bid on received multiple offers. Competition was surprisingly hot in Cleveland too, where 52.2% of properties that Redfin clients bid on received multiple offers.
Buyers who are in a position to do so may want to bide their time. In the same Bloomberg article, Moody’s Analytics chief economist, Mark Zandi, predicted that home prices will hold up, at least through the summer, but declines are coming. Once foreclosure moratoriums and forbearance programs end, lenders will start repossessions as unemployment persists. Ultimately, as many as 2 million homeowners will lose properties because of the pandemic, he said.