Homebuyers Back in Full Force as Real Estate Market Heats Up

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Despite the economic slowdown and reemerging COVID-19 concerns, housing indicators continue to show a steady recovery.

The realtor.com Housing Market Recovery Index reached 97.8 nationwide for the week ending July 4, posting the largest weekly increase since the index was introduced.

This week’s 2.1 point increase over last week brings the index just 2.2 points below the pre-COVID baseline. The overall improvement comes primarily from large jumps in the ‘pace of sales’ component – which continues to move quickly toward recovery- and little movement in the ‘housing demand’ component – which remains well above recovery.

Week ending 7/4 CurrentIndex w/w change
Overall Housing Recovery Index 97.8 +2.1
Housing Demand Growth Index 119.1 -0.4
Listing Price Growth Index 102.6 +0.0
New Supply Growth Index 90.9 +0.0
Pace of Sales Index 92.9 +7.0

The ‘housing demand’ component – which tracks growth in online search activity – remained visibly above recovery, with this week’s index reaching 119.1, down 0.4 points over the prior week. Despite posting a slight weekly decrease for the third week in a row, the demand index remains 19.1 points above the January baseline. The sustained, record-level homebuyer interest we’ve detected on realtor.com over the last five weeks is setting up a busy summer for housing. Homebuyer sentiment appears to have fully recovered too, as lower mortgage rates and easing job losses have boosted consumer confidence. With supply levels low, this backlog of demand portends increased competition and a shift toward a seller’s market.

Accordingly, the ‘home price’ component – which tracks growth in asking prices – remained the same as last week, at 102.6, 2.6 points above the January baseline. With supply at record lows and buyer competition on the rise, sellers have regained leverage, enabling the fastest price recorded this year. As more offers come through this summer, we’ll get a good indication of whether higher asking prices will translate into higher selling prices.

Notably, the ‘pace of sales’ component – which tracks differences in time-on-market – saw continued signs of improvement for the third week in a row. The time-on-market index reached 92.9, up 7.0 points over last week, and now just 7.1 points below the January baseline, suggesting buyers and sellers are connecting at a faster rate. However, the closing process remains materially slower than last summer, and improvement in the pace of sales remains highly dependent on each market’s ability to contain COVID-19 and weather the economic impact.

The ‘housing supply’ component – which tracks growth of new listings – was complicated by Fourth of July celebrations falling on a weekend as opposed to midweek, boosting the natural pace of new listings, and making a year-over-year comparison unreliable. This component will be calculated again next week. Last week, this index continued on the path to recovery, andreached 90.9, up 1.6 points over the prior week and just 9.1 points below the January growth baseline. Sellers continue returning to the market at a cautious pace and further improvement could be constrained by lingering coronavirus concerns, economic uncertainty, and civil unrest.

Local Recovery Trends

Housing markets in the West and Northeast are leading the recovery — COVID-19 concerns and economic impact slowing recovery in the South and Midwest

Regionally, the West (104.4) continues to lead the recovery with the overall index now visibly above the pre-COVID benchmark. The Northeast (102.1) also surpassed the recovery baseline last week, and continues to improve. The South (96.4) and Midwest (95.4) are still lagging but are now back on a steady recovery path.

Region Avg Recovery Index(week ending 7/4) Weekly
Change
West 104.4 +1.1
South 96.4 +1.4
Northeast 102.1 +1.4
Midwest 95.4 +1.5

What’s Driving the Recovery?

Weather, COVID-19 containment, and economic resilience are three key factors driving regional differences in the housing recovery. Weather wise, cooler temperature markets in the Northeast and Midwest tend to see more seasonal swings in housing activity compared to warmer weather markets in the South and West. The more seasonal markets – which traditionally see the sharpest increases in selling activity as temperatures rise – are benefiting the most as the bulk of activity shifts to the summer months.

Further, per the earlier research, the spread of COVID-19 is closely linked to the housing slowdown, with markets with higher cases per capita more likely to see a bigger impact on supply and the pace of sales. The speed and sustainability of the reopening, and each market’s ability to contain COVID-19, are dictating the speed of recovery across the regions. Finally, per the coverage last month, resilient economies may have an edge in the housing recovery, and areas with strong job markets before COVID-19, especially those with thriving tech sectors, are seeing buyers and sellers reconnect faster than the rest of the country.

14 of 50 Largest Markets Now Above the Recovery Benchmark

Locally, an additional two markets have crossed the recovery benchmark this week, taking the total number of markets above the January baseline to 14, the highest since the early pandemic period. The overall recovery index is showing greatest recovery in Boston, San Francisco, Denver, Philadelphia, and Los Angeles, with growth in demand and the pace of sales surpassing pre-COVID benchmarks.

In the ‘housing demand’ component, 48 of the 50 largest markets are positioned above the recovery trend. The most recovered markets for home-buying interest  include New York, Miami, Milwaukee, Sacramento, and Philadelphia, with a housing demand growth index between 132.3 and 153.5.

In the ‘home price’ component, more markets are now positioned above the recovery trend this week, with 19 of the 50 largest markets seeing the median list price index surpass the January baseline, down from 27 the previous week, as listing prices cooled in some metros In the top 10 most-recovered markets for price, asking prices are now growing at 11 percent year-over-year, on average. Among the most recovered markets for home prices sit Pittsburgh, Cleveland, Louisville, San Francisco, and Cincinnati, with a home price growth index between 108.1 and 113.4.

In the ‘pace of sales’ component, 21 of the 50 largest markets are now seeing the time on market index surpass the January baseline, up from 15 last week. In the top 10 most recovered markets for pace of sales, time-on-market is now down 12 percent, on average, year over year. Interestingly, markets where time on market is recovering the fastest tend to be faster moving than those with a slower recovery, suggesting seller markets pre-COVID may be better positioned for recovery in the months ahead. The most recovered markets for time-on-market include Boston, Philadelphia, Washington, Baltimore, and Louisville, with a pace of sales growth index between 113.7 and 130.8.

As mentioned previously, the ‘housing supply’ component saw a temporary disruption in the natural pace of new listings with the Fourth of July holiday and we will resume commentary on its trajectory next week. Last week, 14 of the 50 largest markets saw the new listings index surpass the January baseline. Interestingly, markets where new supply was improving the fastest tended to be higher priced than those that had yet recovered, suggesting sellers were returning faster in the more expensive markets. Last week, the most recovered markets for new listings included San Jose, San Francisco, Boston, Denver and New York, with a new listings growth index between 120.3 and 129.5.

As mentioned previously, the ‘housing supply’ component saw a temporary disruption in the natural pace of new listings with the Fourth of July holiday and we will resume commentary on its trajectory next week. Last week, 14 of the 50 largest markets saw the new listings index surpass the January baseline. Interestingly, markets where new supply was improving the fastest tended to be higher priced than those that had yet recovered, suggesting sellers were returning faster in the more expensive markets. Last week, the most recovered markets for new listings included San Jose, San Francisco, Boston, Denver and New York, with a new listings growth index between 120.3 and 129.5.

To track the U.S. housing recovery nationally and in the 50 largest metropolitan areas, click here to access the realtor.com® Housing Market Recovery Index.

 

Source: Realtor.com

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