According to the National Association of Realtors (NAR), homebuyers are increasingly emerging from their hiding places to buy houses, which reports pending home sales spiked a stunning 44.3% in May compared with April.
This constitutes the largest one-month jump in the history of the nearly 20-year-old survey and beats expectations of a 15% gain. While it still represents a lower number than a year ago, pending sales measures signed contracts on existing homes, demonstrating how buyers were shopping through May. “Sales had fallen 22% for the month in April, as the economy shut down to slow the spread of the coronavirus,” says CNBC’s Donna Olick.
Historically speaking, home sales have been an indicator of what’s ahead, where the economy is concerned, as it reflects buyers’ sentiments about the future. NAR chief economist Lawrence Yun adds, “This has been a spectacular recovery for contract signings, and goes to show the resiliency of American consumers and their evergreen desire for homeownership. This bounce-back also speaks to how the housing sector could lead the way for a broader economic recovery.”
The biggest issue is supply, according to Yun, who says homebuilders are key to solving the acute and persistent underproduction of homes over the past decade. “The supply of existing homes for sale at the end of May was nearly 19% lower annually, according to the NAR,” says Olick. “Single-family housing starts in May were not as strong as expected, although building permits, a measure of future construction, did gain some steam.”
What is most surprising is that buyers came back to the market despite restrictions on open houses in many states. “Real estate agents are offering virtual tours as well as individual tours of empty homes, where buyers can open a lockbox and tour the homes themselves,” says Olick. “Some buyers are signing contracts on homes they’ve never even entered physically.” Historically low mortgage rates are a huge part of the revival, helping buyers in a market that remains pricey due to high demand.
According to the US Census, new home sales (measured by signed contracts) also jumped nearly 17% in May, compared with April, and were 13% higher than May 2019.
Baltimore regional statistics mirror the national ones, with May stats rebounding from April, while still down significantly from May of 2019. Median prices, however, actually ticked up a bit year over year, which reflects the lack of inventory. Strong demand is supporting home prices in the area, at least for now. (see chart below)
Because of stunted market activity in the traditionally strong spring market, due to coronavirus, buyer demand for homes should continue into the hot summer months – traditionally a cool time for home sales.