June 15, 2020
Reports from Redfin, Seattle, and Clever Real Estate, St. Louis, illustrate the lingering effects of the coronavirus on the home-buying process—and the current state of home-buying demand.
Redfin reported seasonally adjusted home buying demand jumped in early June and is now 25% higher than it was before the coronavirus smacked the economy. The weekly report said this marks the eighth straight week of rising demand.
The report said lack of inventory continues to constrain home sales; however, it said there are signssellers are beginning to come back to the market. After falling to 21% below last year’s level the week of May 25-31, new listings last week continued their recovery; last week’s new listings were 15% below last year’s level. With demand surging and supply recovering, Redfin expects sales to strengthen; mortgage purchase applications were up 7% year-over-year in the last week of May and up even more, 13%, in the first week of June.
Redfin said for the week of June 1-7, year-over-year growth in asking prices was up 9.9%, compared to 7.9% the week before, and 3.9% in January and February. Sales prices for the first week of June are up 3.1% year-over-year, an improvement from 1.3% in May, when offers from late March and April were still closing. The percentage of newly listed homes accepting an offer within 14 days of their debut increased from 42% in May to 47% in the first week of June.
Redfin also reported 49.4% of its offers faced competition in May, up from 43.9% during April. The report said while sellers are jumping back into the market as states across the country reopen, there remains a shortage in houses for sale, which is fueling bidding wars; the number of listings on the market in May was 18.9% lower than the same period last year.
“Bidding wars also jumped in May because homebuyers felt they were starting to get more clarity around where the economy was headed, with cities around the nation lifting stay-at-home orders. This gave house hunters more confidence to compete,” said Redfin lead economist Taylor Marr. “But with coronavirus cases back on the rise in many states, only time will tell whether that confidence is sustainable.”
Of the 24 metros in this analysis, 11 saw a majority of Redfin offers facing competition in May. That’s up from eight metros in April. Redfin agents say competition has picked up significantly in recent weeks with fierce bidding wars, many involving all-cash offers that are driving up prices.
Meanwhile, Clever said many buyers continue to show interest in the housing market in spite of stricter standards. Researcher Francesca Ortegren said sellers have tended to be more cautious in the wake of the lockdowns by keeping their homes off the market.
“With rapidly growing unemployment rates and general uncertainty about the severity of the economic impact of the shutdowns, mortgage lenders began tightening their lending standards,” the report said. “Many homeowners bought just before COVID-19 took over the country, when the market was seemingly strong. Since then, many pre-pandemic buyers have lost significant portions of their household income and are facing unexpected financial hardships.”
As a result, Ortegren said, “recent home buyers have had very different experiences than those who purchased their homes before the pandemic. Most notably, they experienced more negative affect related to homeownership, higher levels of buyer’s remorse, and more concerns about finances than those who bought between 2015 and 2019. 2020 home buyers are more than twice as likely to report feelings of anxiety and stress than home buyers who bought in the last five years, and they’re less likely to report feelings of comfort, security, happiness and pride.”
Other report findings:
–75% of 2020 home buyers reported feeling concerned about paying their mortgage due to COVID-19-related financial hardships.
–In spite of COVID-19 fears, it’s still a seller’s market. 42% of homeowners who bought during the pandemic reported entering a bidding war
–55% of 2020 home buyers reported that at least one person who typically contributes financially to housing costs has lost their job since purchasing their home
–63% of home buyers who bought in the beginning of 2020 reported being concerned about their home going underwater compared to 53% of people who bought during the pandemic.
–37% of recent homeowners have taken out more than $2,000 in non-mortgage debt since purchasing their home
–Nearly one-quarter of recent buyers have less than $1,000 in emergency savings
–23% of home buyers who bought during the pandemic reported never entering the home in person, only viewing photos or doing a virtual tour
–Regrets of homeownership are largely related to worries about the value of one’s home as a result of the pandemic