Waves of Homebuyers Hit the Housing Market Before Labor Day

Waves of Homebuyers Hit the Housing Market Before Labor Day

25th August 2020 – The realtor.com Housing Market Recovery Index reached 104.8 nationwide for the week ending August 15, posting a 0.9 point decrease over last week and 4.8 points above the pre-COVID baseline. The ‘housing demand’ component remained above recovery, with this week’s index reaching 121.8, the second highest index value since March,
Locally, a total of 34 markets have crossed the recovery benchmark as of this week. The overall recovery index is showing greatest recovery in Las Vegas, Seattle, New York, Boston, and Philadelphia.

National Recovery Trends

Waves of home shoppers continue to drive the housing market recovery this summer, powering sales and putting a dent on inventory as back-to-school plans hang in the balance. The realtor.com Housing Market Recovery Index reached 104.8 nationwide for the week ending August 15, posting a 0.9 point decrease over last week and 4.8 points above the pre-COVID baseline. The slight drop in the overall index this week comes after visible and opposite changes to demand and supply components of growth.

The ‘housing demand’ component remained above recovery, with this week’s index reaching 121.8, the second highest index value since March, after posting a second consecutive weekly increase. In contrast, the ‘housing supply’ component declined back down to 97.5, after having surpassed the recovery threshold last week. New listings remain on the right trajectory but growth is still variable on a week to week basis, and consistent improvement will be key in the weeks to come.

With supply and demand moving in opposite directions, sellers are clearly gaining an upper hand as buyer competition builds up. While sellers are returning to the market, buyers are increasingly outnumbering them, causing overall levels of inventory to decline.

The pandemic has transformed the homebuying season to one that’s not dictated by the school calendar. In a typical year, online traffic peaks in July and begins to dwindle down in august as schools restart in the fall. This year, online traffic has continued to accelerate through August, as most of the country debates back-to-school plans. This bodes well for sellers in the next few weeks, as the usually quieter early fall season may see summer levels of activity.

Overall Housing Recovery Index 104.8 -0.9
Housing Demand Growth Index 121.8 +3.3
Listing Price Growth Index 106.5 +0.2
New Supply Growth Index 97.5 -4.2
Pace of Sales Index 104.7 +0.0

The ‘housing demand’ component – which tracks growth in online search activity – remained visibly above recovery, with this week’s index reaching 121.8, up 3.3 points over the prior week and 21.8 points above the January baseline. Homebuyer interest continues to outpace last year levels as detected on realtor.com over the last few months. While record-high prices, short supply and economic headwinds pose significant challenges, the pool of ready-to-transact buyers continues to grow.

Powered by a backlog of demand, the ‘home price’ component – which tracks growth in asking prices – increased by 0.2 points last week, and is now at 106.5, 6.5 points above the January baseline. With supply at record lows and buyer competition on the rise, sellers have regained leverage, enabling the fastest price growth recorded since January 2018. As inventory and foot traffic grow through the end of the summer, we’ll get a good indication of whether higher asking prices will translate into higher selling prices.

The ‘pace of sales’ component – which tracks differences in time-on-market – continues to remain above the pre-COVID baseline. The time-on-market index remained the same as last week, at104.7, 4.7 points above the January baseline, suggesting buyers and sellers are continuing to connect at a faster rate and setting up the peak homebuying season in August.

Notably, the ‘housing supply’ component – which tracks growth of new listings – declined to 97.5, down 3.3 points over the prior week, and 2.5 points below the January baseline. The temporary boost in new listings seen earlier came as the summer season replaced the typical spring homebuying season. More homes entered the market than typical for this time of the year, but further improvement could be limited going into the fall as the peak cycle subsides.

Local Recovery Trends

The Midwest Approaches the Recovery Threshold
Regionally, the West (112.7) continues to lead the pack in the recovery, with the overall index now visibly above the pre-COVID benchmark. The Northeast (107.4) and South (101.8) remain above recovery pace but conditions in the south declined slightly this week. The Midwest (99.7) continued to see slight improvements in market conditions.

Notably, it was primarily the ‘housing supply’ component which decreased the South’s overall score this week. The ‘housing supply’ component, measuring new listings, declined -3.4 points in the South, while all other components grew. While the Midwest and Northeast continued to see improved supply conditions, the West’s ‘housing supply’ component also declined, by 2.7 points, potentially indicating a small slip in seller confidence in the South and West this week.

Social distancing and economic resilience continue to be key factors driving local differences in the housing recovery. Per our 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, 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. Are you ready to list your house? Talk To Tammy, 636.931.9100 

Tammy Fadler