SEATTLE, Sept. 1, 2020 — (NASDAQ: RDFN) — The U.S. housing market heated up even more during the four-week period ending August 23 with strong sales and price growth unfazed by seasonality, according to a new report from Redfin, the technology-powered real estate brokerage.
The seasonally adjusted Redfin Homebuyer Demand Index was up 29% from pre-pandemic levels in January and February. The biggest change from recent weeks is the number of new listings, which were up 4.1% from a year earlier—the strongest gain since March.
However, the number of homes actively listed for sale during the period was still way down (28%) from the same period a year ago. Active listings have been down 20% or more from a year earlier since the four-week period ending May 31.
“A lot of the homebuyers I’m working with also have a home they need to sell, but they feel stuck,” said Milwaukee-area Redfin agent Melissa Killham. “Low inventory and a competitive market is making potential sellers afraid to put their house up for sale. They are worried that they won’t be able to buy a home using an offer that’s contingent on the sale of their current home, or that if they sell first, their home will sell before they find something to buy and they’ll have nowhere to live in between.”
Largest annual increase in pending home sales since October 2015
Pending home sales for the four-week period were once again much higher than the same time in 2019, up 20% despite an ongoing seasonal decline over the past few weeks. This was the largest year-over-year increase in pending sales since the four weeks ending October 25, 2015.
Because growth in homebuying demand (as measured by pending sales, up 20%) continues to dwarf growth in supply (as measured by new listings, up 4%), there seems to be no end in sight to the upward pressure on home prices.
“More new listings are hitting the market than a year ago, but homebuyer demand is outstripping it,” said Baltimore Redfin agent Tim Maller. “There was a brief lull during the height of the coronavirus outbreaks, but now the number of new listings of homes for sale is back to normal. On the flip side, there are a lot more buyers looking right now than we would typically see.”
Prices keep pushing higher and higher
Home prices were up 11% from a year earlier for the four-week period ending August 23. In 2018 and 2019, the median home sale price peaked during the four-week period ending in the first week of July, declining 2.4% and 1.9% between that period and mid-August. This year over that same period, home prices have increased 5.6%.
The market for homebuyers keeps getting tougher
Buyers in the market today will find homes selling more quickly and closer to list price than ever before. Of homes that went under contract during the four weeks ending August 23, 46.6% found a buyer within two weeks of hitting the market—the highest level Redfin has seen since at least 2012 (as far back as its data is available). During the same period last year, 32.5% of homes found a buyer within two weeks.
“This market is really squeezing first-time homebuyers at lower price points pretty hard,” added Maller.
“Many homebuyers are waiving home inspections, appraisals and everything they possibly can to try to win in a bidding war,” continued Killham. “The busy season for real estate seems to be prolonged this year. Usually things have slowed down by now, but homes are still flying off the market, sometimes before you can even see the properties.”
The average sale-to-list price ratio increased again to a new record high of 99.2%—meaning homes are selling closer than ever to their list price—up from 98.3% during the same period last year. Year-over-year changes of nearly a full percentage point in this measure are very rare—last seen in early 2013 as the housing market was finally bouncing off the post-recession bottom.
The housing market seems invincible right now
“It seems like nothing can stop the housing market from charging forward with rising prices and increasing sales right now,” said Redfin chief economist Daryl Fairweather. “Uncertainty around the election, ongoing concerns about the pandemic, high unemployment with expanded benefits that have expired… none of that seems to matter to real estate. If there are dark clouds on the horizon right now for the housing market, you really have to squint hard to make them out.”
On Thursday the Fed officially confirmed their strategy that will hold rates low for a long time. This is likely to mean that mortgage rates around 3% are the “new normal,” and will continue to drive the housing market through at least the end of the year.
Redfin is a technology-powered residential real estate company, redefining real estate in the consumer’s favor in a commission-driven industry. We do this by integrating every step of the home buying and selling process and pairing our own agents with our own technology, creating a service that is faster, better and costs less. We offer brokerage, iBuying, mortgage, and title services, and we also run the country’s #1 real estate brokerage search site, offering a host of online tools to consumers, including the Redfin Estimate. We represent people buying and selling homes in over 90 markets in the United States and Canada. Since our launch in 2006, we have saved our customers over $800 million and we’ve helped them buy or sell more than 235,000 homes worth more than $115 billion.