By Meghan Hall
In what has been deemed an unlikely bright spot in today’s economy, the national housing market continues to see tremendous growth. Homes are selling far faster than they typically do—and they’re selling for more. According to a recent Redfin report, median home prices that sold during a four-week period ending on August 9th were up 10 percent year-over-year, the largest increase in six years. Home buyers today are serious and eager to close on deals; first-time buyers led the initial charge, and now the buyer profile has expanded to include those in all phases of life.
“I think most importantly people are extremely conscious now of where they live,” explained Ken Perlman, managing principal at John Burns Real Estate Consulting. “Everybody is, for all intents and purposes, in their home all day, every day. And so, the home has taken on an even greater importance in people’s lives than it ever did.”
A summer survey conducted by John Burns Real Estate Consulting revealed that of 5,000 recent home buyers, 69 percent cited the current pandemic as the main reason they purchased. By comparison, just 31 percent of interviewees stated they had an intention to buy prior to COVID-19.
The growing desire to purchase a home has meant that instead of the typical late-summer slowdown, the national housing market continues to pick up. Prices continued to increase into August by a rate of 3.5 percent, while over the same time period last year they fell by 1.7 percent, based on Redfin data. Additionally, the average sale-to-list price increased to 99.1 percent—a record high—showing that homes are selling closer to asking price than ever.
There are a lot of motivating factors driving potential buyers to market. Chief among them is simply a desire for more space. For first time buyers, that often means leaving behind apartment living; for young families, buying is an opportunity to upgrade to more space. John Burns Real Estate Consulting also notes that more than 1.12 million people between the ages of 23 to 30 have moved home since February, increasing the desire for space among older, more established buyers, as well.
“People are re-emphasizing where they live and how they live. What that means is is that people who are living in more dense environments, for instance more dense apartments, are looking for a little bit more space,” said Perlman.
Additionally, today’s buyers are not only looking to take advantage of low interest rates, which are hovering around three percent, but they are often redirecting personal finances from entertainment-based pursuits towards the home. Perceptions about increasing home prices are also encouraging buyers to act sooner rather than later.
“Lifestyle elements combined with low mortgage rates that are really creating the environment that we’re seeing now,” said Perlman. “Households are spending more on their homes. They’re not traveling; they’re not going to sporting events or movies…where people are choosing to allocate their resources is more concentrated on the home.”
Demand for for-sale housing inventory has increased steadily over the past several months. John Burns Real Estate Consulting estimates that there is just 1.5 units of unsold inventory per community, a 20 percent year-over-year decline. Initially, it was first time buyers moving to the suburbs that brought the housing market back to life, but now buyers who are looking to upgrade, and even those who were looking to downsize, have entered the market.
“The market was really reinvigorated by first time buyers looking for space, those looking to get out of an apartment,” said Perlman. “They didn’t have a previous home to sell; they are comfortable with technology, and a lot of first-time buyers are actually pretty well to do buyers. One-in-four are dual income and college educated.”
Perlman continued, “Now, we are seeing an expansion of the buyer profile…It really started with the first-time and the young families, and it has really broadened to everybody.”
What all of these buyers have in common now is motivation. Today’s buyer pool is ready to sign on the dotted line, and are not afraid to put in their best offer in order to secure a home. As a result, many in the industry believe that price appreciation will continue as demand continues strong and interest rates remain low.
“If somebody is out now, if a buyer is out now looking for a home in this environment, they’re looking at a home because they want to buy. The days of kind of the looky-loo traffic, the pop into a model home and to see what is going on, that’s not what we’re seeing right now,” emphasized Perlman. “The buyers that are out there are serious purchasers.”