A sign of a real estate property for sale shows the house as “under contract” in Washington, DC, November 19, 2020.
Saul Loeb | AFP | Getty Images
Pandemic-driven demand sent total home sales in 2020 to its highest level since 2006.
However, even the most avid buyers face the barriers in today’s real estate market. Record low supply and record high prices limit exceptionally high demand.
Closed sales of existing homes in December rose just 0.7% in November at a seasonally adjusted annualized rate of 6.76 million units, according to the National Association of Realtors. Sales were 22% stronger than in December 2019.
As unexpected as a global pandemic was, so was the reaction of homebuyers. After the fall in March and April, sales suddenly began to grow. Total sales at the end of the year ended at 5.64 million units, the highest level in 2006 and much stronger than expected before the pandemic. Buyers were driven by the desire for larger, suburban homes with dedicated spaces for work and school.
“Home sales could reach 8 million if they had more stocks,” said Lawrence Yun, chief economist for real estate agents. “Mortgage rates are expected to remain very low throughout 2021, although they may have already seen the lowest.”
Strong demand exacerbated what was already a low inventory of homes for sale earlier this year. At the end of December, the inventory amounted to only 1.07 million homes for sale, down 23% year-on-year. At the current point of sale, this represents a supply of 1.9 months. This is the lowest number of homes since real estate agents began pursuing this value in 1982.
Low supply and strong demand continued to increase heat below house prices. The average price of an existing house sold in December was $ 309,800, an increase of 12.9% compared to December 2019 and the highest median price since December.
Part of the sudden rise in the median price is that home sales are stronger on the upper end of the market, where there is more supply. Home sales with prices below $ 100,000 fell 15% annually in December, while home sales priced between $ 500,000 and $ 750,000 rose 65% annually. Home sales of $ 1 million are up 94 percent from a year ago.
Strong competition for homes also has more buyers making cash offers.
First-time buyers accounted for 31% of sales. They usually represent about 40% historically.
It also took an average of just 21 days to sell a home in December.
“It’s unusual, because every year during the holiday season we see the days on the market growing, but not this year,” Yun said.