Even though home values have budged little, if at all, on the backdrop of the pandemic-prompted economic recession, few home shoppers seem to have relented this year, incited by ever-lower mortgage rates. Yet, the highly constricted inventory across the U.S. will leave some buyers behind in 2020, according to an analysis by Realtor.com.
In May, pending home sales leaped by the staggering 44.3% from April, posting the largest month-over-month increase since the National Association of Realtors began tracking the numbers in 2001. The future-looking indicator means that existing home sales, which typically take a month or so to complete after contract signings, will also notch up in the next 30-45 days. In May, existing home sales were still 9.7% down from the previous month.
But sales might not really recover in 2020, mainly due to limited stock that arrives on the market, Realtor.com says. In a new forecast released in June, the real estate listing website expects existing home sales to be 15% lower this year.
Not enough new listings to sustain home sales growth
The prediction lies in the relationship between existing home sales and new listings. After crunching the data from the last three and a half years, Realtor.com found a strong correlation between the two. In the 2016 – 2019 span, new listings accounted for an average of 97% of sales. That share may change seasonally depending on the availability of old inventory and the pace of the market.
Since the onset of the coronavirus pandemic, new listings have plummeted in a time of the year when they would have spiked to their highest levels had it been a conventional annual cycle.
According to Realtor.com, new listings usually peak in April, preceding a yearly crest in existing home sales in June. In 2020, however, due to the coronavirus outbreak, April marked the monthly bottom for new listing counts with less than 290,000 abodes arriving on the market across the country, almost a half of the historical average of 511,000.
In March through May, the largest yearly declines in new listings occurred in Milwaukee (64%), Philadelphia (48%) and New York City (43%), per Realtor.com.
Even though in May and June, the weekly tallies of new listings have improved in absolute terms since then, they are still dramatically below their year-ago levels. The rate of annual decline has not changed much in the six weeks ending June 27, having remained between 17-23%, Realtor.com finds.
Even though more sellers are likely to put their residences for sale through August, Realtor.com contends that the loss of new listings this spring and early summer is unlikely to be recovered, thus, keeping sales numbers below historical levels.
That is because some 57% of all new listings in a given year materialize between March and August, according to the company. The same time frame yields an average of 56% of annual home sales.
Yet, uncertainty and volatility still permeate the national housing market. A sustained second wave of Covid-19 infections, for instance, would perhaps dissuade scores of homeowners from selling, even if they planned to do so later this year. In such an event, home sales would plunge even further down from the 15% annual decease Realtor.com anticipates.
In the case of a “slower rebound in new listings,” the firm predicts that sales will drop 18%. “A faster recovery in listings,” though, will mean only a 13% decline in home sales in 2020.