By Martin Santiago
PENDING home sales, which measure signed contracts to purchase existing homes, increased 5.9% in August compared with July, according to the National Association of Realtors.
The usual summer slowdown in the housing market is not happening this year. Buyers continue to show strong demand, spurred by the new stay-at-home world of the coronavirus and by record low mortgage rates. We are witnessing a true V-shaped sales recovery as homebuyers continue their strong return to the housing market.
Realtors are optimistic, the economy is picking up, but few resale homes are up for sale.
Fifty-four percent (54%) of consumers believe it’s a good time to sell their home.
The continuing lack of housing supply in the state is holding up the recovery and could create even higher price inflation. A number of factors including low mortgage rates, pent up demand from the shutdown period, and migration changes are pushing up sales and prices. The big story is a growing, severe lack of home listings which may raise home prices in September.
In Metro Los Angeles, home prices rose from $553,000 last month to 666,230 via a 28.8% jump in sales activity. In LA County, home prices rose to $653,570 which is up 7.1% from last month. In San Diego, home prices rose 6% over August to a new median price of $179,000, while Orange County saw price growth of 1.1% ($10,000) over August’s to a new home price average of $880,000. San Bernardino is the recipient of worker migration out of LA. Prices in San Bernardino rose $25,000 to a new median of $350,000, a growth of 7.7%.
Record unemployment and the COVID-19 crisis hasn’t seemed to scare buyers away from purchasing houses in the Los Angeles area. In fact, they’re buying them faster than they were in nearly all of 2019. Data shows 78% of members have seen no change in buyer interest as a result of the coronavirus. Additionally, 87% of those surveyed said it hasn’t affected the number of homes on the market.
Real estate has skyrocketed in recent years and has shown no sign of slowing down. The only thing holding back even stronger sales is the shortage of homes available. Inventory at the end of August was down 21% annually, marking the lowest supply ever recorded by the National Association of Realtors (NAR), since it began tracking this metric in 1982.
Mortgage rates marked record lows in August, giving buyers additional purchasing power.
Home prices, however, continue to push higher due to stiff competition in the market.
August sales of newly-built homes, which are also measured by signed contracts, surged dramatically, as buyers are now looking for new, high-tech, smart homes with floor plans designed for working and schooling at home. Builders are also benefiting from the severe shortage of existing homes for sale.
Millennials, long viewed as perennial home renters who were reluctant or unable to buy, are now emerging as a driving force in the U.S. housing market’s recent recovery. Demand from millennials, who today range from their mid-20s to late 30s, has been increasingly important to the housing market since at least the middle of the last decade. But more recently, these new homeowners have been pushing aside older generations to become an even bigger influence.
Millennials reached a housing milestone early last year when the group first accounted for more than half of all new home loans, and they consistently held above that level in the first months of this year, the most recent period for which data are available, according to Realtor.com. The generation made up 38% of home buyers in the year that ended July 2019, up from 32% in 2015, according to NAR.
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Martin Santiago is a broker associate at Compass Beverly Hills, a full-service residential brokerage firm. The information presented in this article is for general information only and is not, nor intended to be a formal legal advice nor the formation of a broker-client relationship. Call or email Martin at (213)788-8300 & [email protected].
