In a recent survey of home sellers by Qualtrics, 87% of respondents said they were concerned their home won’t sell because of the pandemic and resulting economic recession. Of the respondents, 51% said they are “seriously worried.” That concern seems reasonable considering the current condition of the economy. The data, however, is showing that home purchasers are still very active despite the disruptions American families have experienced this year.

The latest Existing Home Sales Report published by the National Association of Realtors (NAR) revealed that 340,000 single-family homes sold in this country last month. NAR’s most recent Pending Sales Report (homes going into contract) surpassed last month’s number by over 44%, which far exceeded analysts’ projections of 15%. ShowingTime reported that appointments to see homes (both virtually and in-person) have increased in every region of the country and are up 21.4% nationwide over the same time last year.

While buyer activity is surging, the number of listings has fallen to an all-time low. Zelman Associates, in their latest residential real estate report, revealed that housing inventory as a percentage of households has fallen to 1.2%, which is half of the long-term average and lower than any other time in our history.

Bidding Wars Heating Up Again

With buyer demand growing and the supply of available homes shrinking, purchasers are again finding themselves needing to outbid other buyers. NAR, in a recent blog post, revealed:

    “On average, there were about three offers on a home that closed in May, up from just about two in April 2020 and in May 2019 (2.3 offers).”

Bidding wars guarantee houses sell quickly at a price near or even slightly over the listing price.

Bottom Line

If you’re thinking of selling, don’t be concerned about putting your house on the market right now. There’s no better time to sell an item than when demand for it is high and supply is low. It is exactly at that time when you will negotiate your best possible deal.

Taking Advantage of Homebuying Affordability in Today’s Market

 Everyone is ready to buy a home at different times in their lives, and despite the health crisis, today is no exception. Understanding how affordability works and the main market factors that impact it may help those who are ready to buy a home narrow down their optimal window of time to make a purchase.

There are three main factors that go into determining how affordable homes are for buyers:

• Mortgage Rates
• Mortgage Payments as a Percentage of Income
• Home Prices

The National Association of Realtors (NAR), produces a Housing Affordability Index, which takes these three factors into account and determines an overall affordability score for housing. According to NAR, the index:

    “…measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home at the national and regional levels based on the most recent price and income data.”

Their methodology states:

    “To interpret the indices, a value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home. An index above 100 signifies that family earning the median income has more than enough income to qualify for a mortgage loan on a median-priced home, assuming a 20 percent down payment.”

So, the higher the index, the more affordable it is to purchase a home. Here’s a graph of the index going back to 1990:

Taking Advantage of Homebuying Affordability in Today’s Market | Keeping

Current Matters

The green bar represents today’s affordability. We can see that homes are more affordable now than they have been at any point since the housing crash when distressed properties (foreclosures and short sales) dominated the market. Those properties were sold at large discounts not seen before in the housing market.

Why are homes so affordable today?

Although there are three factors that drive the overall equation, the one that’s playing the largest part in today’s homebuying affordability is historically low mortgage rates. Based on this primary factor, we can see that it is more affordable to buy a home today than at any time in the last seven years.

If you’re considering purchasing your first home or moving up to the one you’ve always hoped for, it’s important to understand how affordability plays into the overall cost of your home. With that in mind, buying while mortgage rates are as low as they are now may save you quite a bit of money over the life of your home loan.

Bottom Line

If you feel ready to buy, purchasing a home this season may save you significantly over time based on historic affordability trends. Reach out to a local real estate professional today to determine if now is the right time for you to make your move.

The pandemic and its shutdown of social interaction has had a chilling effect on the housing market, much like a spring blizzard blindsides the early daffodils.

Many buyers and sellers are exiting the market, data suggest, as concerns about job security and health cause people to put life-changing plans on hold. “I’m calling it the Great Pause,” said Tommy Choi, a real estate agent at Keller Williams Chicago-Lincoln Park.

“There won’t be a spring selling season this year, that’s for sure,” said Ron DeVries, senior managing director at appraisal firm Integra Realty Resources.

What that means for prices remains guesswork, but the issue is vital to homeowners who remember the ruinous decline in housing values during the 2008-09 recession. Circumstances are different this time and there is no historic precedent to guide analysts, so expert opinions to vary about the direction of housing prices.

For renters and their landlords, the picture is mixed. A little leverage has shifted to the tenants, as evictions currently are on hold. With the spring a popular time for lease renewals, fewer building owners are pushing for rent hikes, fearful they’ll only get vacant apartments in the bargain. “For a lot of landlords, the big question is what’s going to happen in May,” said John Kennedy, executive vice president of operations at Chicago-based Evergreen Real Estate Group, which owns or manages 8,500 units, mostly in the Midwest.

A similar hold-your-breath attitude is common among experts in the for-sale market. Geoffrey Hewings, who analyzes housing sales as emeritus director of the Regional Economics Applications Laboratory at the University of Illinois, said the pandemic’s negative effects on the market will increase.

“I’m a lot less optimistic than most folks,” he said. Hewings, who compiles monthly reports for the Illinois Association of Realtors, said as layoffs and economic pain spread, there could be a spike in foreclosures this summer.

“It depends on how long the lockdown lasts and the effect it will have on people,” he said. “A friend and I were talking about when we’d feel comfortable going to an opera or a baseball game. Probably not this year. So are people going to feel comfortable going out looking at homes?”

Hewings’ most recent report for the Realtors, covering March, picked up only pre-pandemic business and showed things humming along in the Chicago market, with average prices and sales volumes both rising. The tougher news will come when April’s analysis is done.

Redfin, which crunched Multiple Listing Service data for the week ending April 10, found prices flattening in the Chicago region and a 25% decline in active listings compared with a year ago.

Looking at MLS data within the city itself, the Chicago Association of Realtors found a more than 60% decline in new — as opposed to active — listings compared with a year ago for the week ending April 11. It said the year-over-year inventory was down 20% for single-family detached homes.

“Housing inventory will continue to be a problem,” Hewings said. During the last recession, the inventory reached an 18-month supply, and now it’s down to just a couple of months.

Choi, past president of the Chicago Association of Realtors, said constrained inventory may stabilize prices in the coming months because it could lead to more bidders per listing. “We were starting to see a shift from a seller’s to a buyer’s market even before the pandemic,” he said.

He also said there are indications of pent-up interest from buyers. Mortgage brokers are saying they are writing more pre-approval letters for buyers, Choi said, and online searches of listings have increased as people have sheltered in place.

Showings continue but now are often only virtual sessions, or physical meetings subject to state guidance that limits them to four people.

One thing that confounds the experts is they can’t use anything in history to judge the pandemic’s impact on real estate. The Great Recession of ’08-09 was fueled by debt, so it hit housing more than other sectors. COVID-19’s reach spans the economy. “It can be comforting and it can be scary that we’re all facing this at the same time,” Choi said.

For Hewings, it comes down to one observation that applies, pandemic or not. “When people are concerned about their jobs, the last thing they want to do is invest in the housing market,” he said.