Summer is the new spring for real estate! Here’s what the summer real estate market 2020 has in store.
As the coronavirus started making its way throughout the US, the spring real estate market got sidetracked. Sellers have been cautious about putting their homes on the market and buyers’ purchase decisions have been affected by the increasing unemployment and job loss. In turn, this had greatly impacted the number of homes for sale slowed what’s typically known as a busy real estate season. However, with many states beginning to reopen and best practices for the industry are now in place, summer 2020 promises to turn thins back around. Data from across the industry shows signs of a rebound in the coming months! So what will the summer real estate market 2020 be like? Here are all the data and market trends you need to know.
Homebuying Activity Improved
The widespread lockdowns due to the coronavirus pandemic had halted homebuying activity and home sales. But, new data from Realtor.com confirms that homebuying activity is making a comeback this summer season. After putting their plans on hold due to the COVID-19 pandemic, homebuyers are jumping back into the market. They feel comfortable about buying in the midst of the social distancing measures. According to Danielle Hale, Realtor.com Chief Economist
“There are a lot of indicators showing that the summer is going to be a good period for the housing market. I think we’re going to see some of the buying that would have happened in the spring shift into the summer”
When it comes to sellers, real estate market trends show that they’re still making a very calculated return to the market. While sellers are re-listing their homes, Realtor’s June 2020 data show that the total number of homes available for sale continued to be constrained. New listings decreased by 19.3% in June and housing inventory decreased 27.4% year-over-year nationally. Nonetheless, this is an improvement form from a decline of 44.1% in April and a decline of 29.4% in May.
“That’s definitely an improvement, a sign that we’re moving in the right direction. We’ve still got some ground to cover to get back to a more normal spring and summer housing market, but we’re moving in the right direction” said Hale.
So while it’s unlikely that we’ll see the pace of national home sales return to normal, we should see closings speed up in the coming weeks and peak later than usual this summer. This is the first trend that shows that the US is poised to have a shortened but strong summer real estate market.
Days on Market Extend Slowly
Although we’re starting to see more homes for sale throughout the country, homes are still selling at a slower rate than this time last year. This is largely due to the stay at home orders and modified behavior resulting from COVID-19. According to the same report by Realtor.com, the typical home spent 72 days on the market in June nationally. This is 15 days slower than June of last year. This means that the process of selling and buying real estate is taking longer. For sellers, this means it might take buyers a bit longer to find you. Both sellers and buyers should be prepared for a little bit longer to get to the closing table.
Related: How Average Days on Market Should Affect Your Investment Decision
Of course, this real estate summer market trend varies across the US housing market 2020. After all, real estate is local is how the market will recover depends on how hard the COVID-19 pandemic affected it. According to Realtor, the typical home spent 53 days on the market in the 50 largest US metros. This year, home only spent an average of 6 days longer on the market compared to June of last year. When compared to the national rate, average days on market in large metros are seeing less than half the growth. This could lead to this real estate market forecast: large metros will see a quicker recovery compared to the rest of the country.
However, there is significant variation from market to market. According to real estate data from Realtor, homes actually saw less time spent on the market in these large metro areas:
- Rochester, NY (-4 days)
- Hartford-West Hartford-East Hartford, CT (-3 days)
- Boston-Cambridge-Newton, MA-NH (-3 days)
On the other hand, these large metro areas saw large increases in time spent on the market:
- Pittsburgh, PA (+30 days);
- New York-Newark-Jersey City, NY-NJ-PA (+21 days);
- Miami-Fort Lauderdale-West Palm Beach, FL (+21 days).
This data is a reminder of the importance of choosing the right real estate market for investors. If you’re looking to buy an investment property in 2020, make sure to keep these trends in mind as you enter the summer real estate market.
Listing Prices Continue to Accelerate
Home prices remained stable or dropped a little in most markets across the US at the start of the pandemic. As the summer housing market gets underway, economists expect prices to rise. June data by Realtor.com shows that the national median home price grew by 5.1% year-over-year and reached a new high of $342,000. This is within the typical annual price appreciation this time of year and an acceleration from the 1.6% price growth seen in May. Likewise, the national median price per square foot also grew by 7.7% year-over-year, which is an acceleration from the 5.4% growth seen last month.
The culprit for the increasing house prices is the lack of homes for sale and a rush of home buyers returning to the market in 2020. This is a result of the laws of supply and demand: when there are many people demanding houses but not enough supply of homes on the market, house prices will go up. And according to Realtor.com’s Senior Economist George Ratiu, housing market predictions 2020 don’t include home prices dropping over the next few months. As a result, the summer real estate market be better than expected even if it’s far off the normal pace.
Related: How the Coronavirus Will Affect US Home Prices in 2020 and Beyond
Wondering where are home prices increasing faster than others in summer? According to Realtor, the median listing price growth within the largest metros grew by an average of 5.7% compared to last year – an acceleration from the 3.3% year-over-year gain seen in May. Furthermore, of the largest 50 metros, 46 saw gains in prices in June (up from 35 in May). Data shows that the highest year-over-year median list price growth in June was in:
- Pittsburgh, PA (+23.8%)
- Los Angeles-Long Beach-Anaheim, CA (+21.4%)
- Cincinnati, OH-KY-IN (+16.6%)
On the other hand, data shows that the highest price declines are in:
- Miami-Fort Lauderdale-West Palm Beach, FL (-2.3 percent)
- Jacksonville, FL (-0.8 percent)
- Dallas-Fort Worth-Arlington, TX (-0.7 percent)
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Mortgage Applications Rise to 11-Year High
Historically, it’s the housing market that has led the country out of recessions as mortgage rates drop, motivating people to buy. Today’s record-low mortgage rates are certainly fueling interest. Since most experts forecast that mortgage rates will remain in the 3% range throughout the year, homebuyers are jumping on the low-cost mortgage train. This could help offset the higher house prices in some real estate markets. According to Ratiu from Realtor.com:
Buyers, particularly those who still have jobs, are trying to take advantage of historically low mortgage rates…Just as importantly, we have to realize that a lot of people were planning to move and simply put those plans on hold.
Right now, these buyers are returning to the market along with those who were already planning to buy during the summer real estate market. The 9th consecutive week of gains, the number of buyers applying for mortgages rose year-over-year and pushed applications to its highest point in 11 years. This was reported by the Mortgage Bankers Association through their Weekly Mortgage Applications Survey (June 12). According to the MBA’s survey:
- Mortgage loan application volume increased 8% on a seasonally adjusted basis and 7% on an unadjusted basis from the previous week
- The Refinance Index increased 10% from the previous week and was 106% higher than the same week last year.
- The Purchase Index increased 4% on a seasonally adjusted basis and 2% on an unadjusted basis week over week and was 21% higher than the same week last year.
All of this is an encouraging turnaround after the weakness we saw over the past two months due to the coronavirus pandemic impact on real estate. If you’re investing in real estate and looking to financing your investment property, now is a good time to get a mortgage. Keep in mind that with all this competition, it might be harder to get a loan in 2020. However, there are no overall changes in mortgage loan requirements. So, just make sure that you fit these requirements before applying and you’ll be in a good position to obtain a loan.
Homebuilder Confidence & Construction Soar
Another trend that added to the supply shortage and helped keep home prices up is the drop in construction in the US real estate market 2020. Since the beginning of the coronavirus pandemic, homebuilder confidence has done a U-turn. However, homebuilding is now steadily rising again as construction companies resume work after the easing of coronavirus restrictions. The newest NAHB/Wells Fargo Housing Market Index (HMI) reveals homebuilder confidence in newly built, single-family homes rose to 58 points in June (up 21 points). Any score over 50 points mean builders view the housing market in good shape. According to NAHB Chairman Dean Mon:
As the nation reopens, housing is well-positioned to lead the economy forward. Inventory is tight, mortgage applications are increasing, interest rates are low and confidence is rising. And buyer traffic more than doubled in one month even as builders report growing online and phone inquiries stemming from the outbreak.
When it comes to monthly regional average HMI scores, we see that homebuilder confidence is highest in the West which scored 66 points. Homebuilding and construction also rose in the South which jumped to 62 points, the Midwest which rose to 51 points, and the Northeast which surged to 48 points. These summer real estate market trends helped housing starts rise by 4.3% in May to a seasonally adjusted annual rate of 974,000 units, according to the Census Bureau. This strong rebound in permits for future home construction suggests the real estate market in the summer is starting to emerge from the COVID-19 pandemic along with the broader economy.
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Will it be a Seller’s Market or a Buyer’s Market?
For years, the US housing market has been a strong seller’s market. Spring and summer months are particularly good for sellers as buyer competition typically heats up from May through August. However, as the coronavirus pandemic affected both sellers and buyers in 2020, the market’s dynamics are shifting. So will the summer real estate market favor sellers or shift to a buyer’s market? According to Lawrence Yun, Chief Economist of the National Association of Realtors, it’ll be a seller’s market for most people, especially for lower-priced and medium-priced homes. For these sellers, getting multiple offers will be fairly common this summer.
Even with unemployment pushing 13.5%, there are enough motivated buyers to keep prices up. In addition, buyers are taking advantage of record-low interest rates. Still, current inventory and the number of homes on the market is well below the demand. Therefore, finding a home for sale might be challenging for buyers. On the other hand, this is good news for sellers because with few sellers on the market today, interest in your property may be higher that you think. This makes the real estate summer market the time for your house to stand out from the crowd.
Related: Will the 2020 US Housing Market Be a Seller’s Market or a Buyer’s Market?
The Bottom Line
To sum up, housing market predictions 2020 remain positive going into the summer – despite the coronavirus pandemic. We can see that homebuyers now are more confident and starting to go back to the market, ready to make up for lost time from the traditional spring market. This is why many experts are saying the summer real estate market will be the buying season in 2020.
If you want to sell your house this year, right now might be your best opportunity to sell and reap a great home sale profit. For real estate investors, this is also a good time to buy a house to rent out. This is especially true if you’re a cash buyer or can obtain a low-interest rate mortgage. To stay updated on the latest real estate news, keep reading our coronavirus trends blogs.
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