The various shapes predicted by economists reflect their expectations for the charts generated by employment figures, the stock market, retail sales, auto sales and home sales as people return to work. These expectations are tempered by predictions of any potential future issue with a stronger return of the coronavirus that could cause renewed stay-at-home mandates. Unlike the previous recession at the end of the 2000s, which was fueled in part by the housing crisis, today’s difficulties are directly tied to efforts to control the virus rather than any fundamental economic problems.
Nationwide, the housing market is in particularly good shape because demand remains high and mortgage rates are phenomenally low. The housing shortage will keep competition heated and prices firm.
The Washington region, widely regarded as a recession-resistant economy thanks to jobs tied to the federal government and the tech industry, has seen a strong resurgence since May.
Spring market converted to summer market
The housing market, particularly in the Washington, D.C., region, was on track for a robust spring. In the first half of March, before the stay-at-home guidelines kicked in, homes were selling fast and the median sales price for the month reached a 10-year high of $490,000. More than half of all homes sold in the region were snapped up in one to 10 days.
Even in April, as concern about the novel coronavirus spread, regional home prices were up to a 10-year high for the month, at $507,000, which was also an increase of 6.7 percent over the median sales price in April 2019. Homes were selling for the full asking price or more.
But in April, pending sales declined and new listings dropped significantly as sellers opted to hold back their listings. Pending sales refer to homes that are under contract that have yet to go to settlement and will typically show up as sold within 30 to 60 days. Real estate agents, buyers and sellers began to embrace virtual tours and adapt to individualized virtual visits via FaceTime, Skype and Google Hangouts.
Typically, the spring market extends from March through May and then the slower summer pace begins for June through August. But May’s regional market report showed signs of a rebound, with pending sales up and new listings up from April’s lows. Prices continued to rise throughout the region, too. June’s market report showed similar improvements in the regional housing market.
July’s report showcased more improvement in the regional market, with the number of pending sales up 12 percent compared with July 2019. Median sales prices continued to rise to $530,000, up 13 percent compared with July 2019 and up 5 percent over June 2020.
Homes sold in July in a median of eight days, which was faster than in June and than in July 2019.
The number of sales leaped much higher in July, nearly 17 percent above June’s closed sales and 6.8 percent higher than in July 2019.
August saw sales continue to grow, up 12 percent from the prior year. Homes stayed on the market for only a week, as the median sales price rose 11 percent. The limited housing supply continued to shrink, with total active listings down 27 percent.
The regional and national market continues to be boosted by exceptionally low mortgage rates, which increase affordability and entice home buyers onto the market.
Nationally, homeownership was up to 65.3 percent of the population during the first quarter of 2020, according to the U.S. Census Bureau, an increase of 1.1 percent compared with the first quarter of 2019. That means there were 2.7 million more homeowners during the first quarter of 2020 compared with the first quarter of 2019.
The limited number of homes for sale continues to plague markets regionally and locally, with the inventory of homes on the market in this region at a 10-year low in June. For some buyers, trying to find the right house to purchase this summer has felt a lot like trying to find toilet paper back in the spring. The good news is that, while houses are selling faster than new listings are coming on the market — which decreases the number of homes for sale in the regional inventory — new listings coming on the multiple-listing service in June in the D.C. region rose 16 percent compared with new listings in May, a promising sign that more sellers are entering the market.
Naturally, the wave of unemployment claims worries lenders. Most lenders immediately tightened their credit standards to require at least a 640 FICO score or higher, required more evidence of cash reserves and instituted multiple rechecks of employment status. Jumbo loans for high-cost homes became less readily available. These changes limit the ability of many prospective home buyers to finance their purchase.
But the D.C. region appears to be more resilient than other major cities. The unemployment rate was 8.6 percent in the District in June, compared with 20.4 percent in New York City and 19.5 percent in Los Angeles.
The optimism in the real estate industry in the D.C. region is generated by data that demonstrates a resilient economy ready to benefit from low mortgage rates and to overcome the obstacles created by the virus.
Jon Coile, chairman of Rockville-based multiple-listing service Bright MLS (formerly MRIS), writes occasional commentary on the Washington-area housing market.