The recent COVID-19 pandemic has affected all aspects of the economy. Most of this impact can be seen on the news through stories about unemployment numbers, GDP estimates, and stock market volatility. But what impact has the pandemic had on residential real estate?
If we look at the numbers, are fewer homes being sold? Are prices declining? Some of the results might surprise you. Let’s get an update on the figures, both across the U.S. and closer to home in the Hoosier State, focusing on one popular housing metric: existing-home sales.
What are Existing-Home Sales?
Existing-home sales account for more than 90% of total home sales in the U.S. These are based on closing transactions for single-family homes, townhomes, condominiums, and co-ops. Newly constructed homes are not included. The data is released monthly by the National Association of Realtors (NAR) and broken down by region – Northeast, Midwest, South, and West.
Existing-Home Sales in the U.S. – Going Down!
The number of existing homes being sold in the U.S. on a seasonally adjusted basis has declined since February 2020 as the stay-at-home orders around the country have kept people indoors. The most recent data released in April 2020 shows a month-over-month decline of -17.8%. This is the largest month-over-month drop since July 2010 (-22.5%). Sales in April were also down about -17.2% from one year ago (i.e. April 2019).
To put this into perspective, information from the NAR over the last 12 months (ending April 2020) shows that the average seasonally adjusted annual rate of homes sold per month was about 5.3 million. In February 2020, there were about 5.8 million homes sold, which was 500,000 above the average!
In March 2020, when economies started shutting down, 5.3 million homes sold, followed by 4.3 million homes in April 2020. As you can see, the pandemic decreased home sales in April by nearly 20%.
Existing-Home Prices in the U.S. – Going Up!
So what about home prices in the U.S.? The median existing-home price for all housing types in April 2020 was up 7.4% from April 2019. Over that same 12-month time period, the median home price sold was $274,500. The median price is often used when referring to home prices, instead of average, so that outliers do not skew the data. In February 2020, the median home price sold was $270,400, followed by March $280,700, and April $286,800. What’s the pandemic impact on home prices? Sale prices are going up!
The National Association of Realtors Chief Economist Lawrence Yun explains this by stating, “The economic lockdowns – occurring from mid-March through April in most states – have temporarily disrupted home sales. But the listings that are on the market are still attracting buyers and boosting home prices.” Further, “record-low mortgage rates are likely to remain in place for the rest of the year, and will be the key factor driving housing demand as state economies steadily reopen.”
Closer to Home – Indiana Market is Better!
The trend for existing-home sales in Indiana has largely tracked that of the U.S. overall, though the performance has been superior. The most recent data released in April 2020 shows existing-home sales declined -10.4% month-over-month, versus -17.8% for the U.S. Further, we have seen a -11.9% drop in sales in April 2020 from one year ago versus -17.2% for the U.S over the same time frame.
Median home price growth in the Hoosier state is also outpacing the median U.S. numbers. The Indiana median existing-home price in April was up 9.1% from a year prior. Just like the U.S. figures, median home prices have also steadily increased since pre-pandemic. February’s median price was $168,000, followed by $176,000 in March, and $180,000 in April.
The current Indiana residential real estate market is summed up well by Bernice Helman, 2020 President of the Indiana Association of REALTORS, when she says, “We knew sales would wane in April due to the stay-at-home recommendations and we expect that to continue for the next couple months with fewer sellers listing homes.” She continues, “Prices have held firm given the competition spurred by low inventory and the purchasing power created by low-interest rates.”
While the number of existing-homes sold are clearly being impacted by the pandemic, the median price is actually getting a boost from the even lower mortgage rates. Whether this trend continues is yet to be known as the May results are expected to be released on June 22.
The real estate market is a large part of the U.S. economy, and its strength or weakness can provide insight into the overall health of the American consumer. Information on a wide array of economic data, including home sales, can be found on the Bedel Barometer, which is updated at the beginning of every month to help you stay informed.