It’s been quite a year. (How’s that for an understatement?)
In a year marked by viruses and economic declines, the real estate and mortgage market has somehow managed to weather through.
Homebuyer demand is one of the best ways to gauge the industry, but when people are staying home, it can be hard to sell homes. So how has demand fared through the first portion of 2020, and what can we expect in the future?
Let’s take a look at homebuyer demand to see where we stand in August of 2020.
Understanding Homebuyer Demand
There are many different metrics that someone can use to determine homebuyer demand. With so many possible statistics and information points, it’s easy to get lost in a jungle of averages, calculations, and percentages. To keep things simple, we’ll focus on three specific, broad, and far-reaching statistics: total sales, time on the market, and housing prices.
While collecting this data can be difficult, and we’ll have to pull from a variety of resources, by focusing on these three areas we can paint a relatively clear picture of the overall real estate market as it stands in the middle of August of 2020.
Total Sales: Potential Summer Rebound After Spring Decline
How many homes were sold? It’s a simple question, and it’s often the driving stat for perceived homebuyer demand. Total sales are often divided into two categories: existing homes and new construction.
According to Trading Economics, new home sales have been down compared to past years, although they are beginning to bounce back sharply after a rough spring. In February of 2020, national home sales were stellar, with a total of over 5.7 million units sold. But then came the coronavirus and economic shutdown, which caused home sales to plummet. In May of 2020, there were only 3.9 million units sold, down significantly from the 5.3 million sold in May of the previous year.
So we saw steady decline since February, but it appears that things are heading in the right direction. In June, sales rebounded to over 4.7 million, still short of the 5.3 million seen in June of 2019, but a recovery nonetheless.
New home sales also play an important role when measuring homebuyer demand. Information from the U.S. Census Bureau shows strong numbers, with roughly 776,000 new homes sold in June of 2020. This is actually a rise from the previous year (726,000 in June 2019) and a rise from the previous month (682,000 in May of 2020).
Overall, it seems there are reasons to be optimistic about home sales throughout the rest of 2020, although we still need information from July of 2020 to see if the positive trends will continue.
Time on the Market
How long does it take to sell a home? This is another important statistic that can help us determine the demand from buyers. If people are snatching up homes within days of a home being listed, it shows that buyer demand is high. However, if it takes months or even a year to sell a house, consumer demand is clearly low. Basically, the shorter it takes to sell a home, the more demand there is in the market.
This can be one of the most difficult statistics to find, but there are a few sources we can turn to when trying to determine average time on the market.
Realtor.com provides a variety of real estate information, including median listing price, total active listings, and days on the market. According to their data, across the country the average days on the market is 60 days, which is the same as previous years.
A useful feature provided by this site is market-specific data. Their numbers show that homes in San Diego County were sold in an average time of 39 days in June of 2020. This is only an increase of 1 day from June of 2019. In nearby Riverside County, however, homes took an average of 63 days to sell; in June of 2019 the average time was 53.
This is just a small snapshot of data, but it shows that the time on the market is down, although it’s not an extreme drop.
Housing Prices
If buyer demand is high, home prices will inevitably be high as well. More buyers means more competition for each available house. If there is more competition, sellers will inevitably wait for higher offers, so total prices can be a consistent barometer for total homebuyer demand.
Finding average listing prices is relatively easy, but information on total sales price can be more difficult. Once again, we can turn to realtor.com for data. Their Market Outlook report shows that sale prices were $285,000 for June and May of 2020. This is a steady increase in housing prices, and it demonstrates that buyers are still motivated to offer quality bids on the right home.
Homebuyer Demand: Knocked Down, But Fighting Back
So where does all of this information leave us? What’s the overall status of the market and how active is homebuyer demand. Overall, it’s reasonable to say that homebuyer demand has been knocked around, with major dips during late March and April. But it appears that things are starting to recover. The numbers are not yet at a point that we could call it a full recovery, but signs are tipping towards the positive.
A lot will depend on the future dips and spikes in the coronavirus. If the virus starts to fade, people deal with the issue responsibly, and the medical industry is able to handle any increases, overall consumer confidence will increase, which can result in higher home sales, better prices for sellers, and rapid times from listing to sale.
There are reasons to be pessimistic, but overall it appears that homebuyer demand, as well as the real estate and mortgage market in general, is picking itself off the canvas and starting to fight back.
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