While any positive real estate news may be characterized as in the “rear view mirror” the facts are through the first 2 ½ months of 2020 everything from single-family permits, single-family starts, existing-home sales, were performing strong compared to prior year. Yes, it is a time of uncertainty and the COVID-19 virus will undoubtedly slow down the market, however, it is difficult to predict what short-term effects this pandemic will have on future sales given the expected fiscal and monetary stimulus the Fed and government are planning in response to the economic disruption.
All we can do is balance the practice of social responsibility while living life. Unpredictability is the only certainty for now. While the future is an unknown the National Association of Realtors reported This Week in Real Estate that existing home sales climbed to a 13-year high in February. Below are a few highlights from the third week of March that influence our business:
U.S. Existing-Home Sales Climbed to 13-Year High in February. U.S. existing-home sales rose 6.5% in February, increasing to a 13-year high, according to the National Association of Realtors. Total existing-home sales completed transactions that include single-family homes, townhomes, condominiums, and co-ops – rose to a seasonally adjusted annualized rate of 5.77 million. This means sales were 7.2% above February 2019’s rate. According to Lawrence Yun, NAR’s chief economist, February’s sales of over 5 million homes was the strongest increase since February 2007. While the impacts of the coronavirus that causes COVID-19 continues to impact the housing market, Yun said once the effects of the pandemic pass, more homebuyers are likely to return to the market. “For the past couple of months, we have seen the number of buyers grow as more people enter the market,” Yun said. “Once the social-distancing and quarantine measures are relaxed, we should see this temporary pause evaporate, and will have potential buyers return with the same enthusiasm.” That being said, Yun noted that February’s home sales were encouraging but not reflective of the current turmoil in the stock market or the significant hit the economy is expected to take because of the coronavirus. Despite the market’s instability, of the four major regions, only the Northeast reported a decline in existing-home sales, while the remaining regions saw increases, including sizable sales gains in the West, according to NAR.
Mortgage Application Volume Remains High Despite Rate Volatility. After last week’s report on a record-busting week for mortgage applications what probably is surprising, as the country goes into virtual lock down over the coronavirus outbreak, is how strong activity remained. The Mortgage Bankers Association (MBA) reports that, during the week ended March 14, its Market Composite Index, a measure of mortgage application volume, left the volume of business 168 percent higher than the same week in 2019. The Refinance Index decreased 10 percent from the previous week but was still at historic levels, remaining 402 percent higher than the same week one year ago. The seasonally adjusted Purchase Index lost 1.0 percent from its level one week earlier, but purchase activity was 11 percent higher than the same week one year ago. “The Federal Reserve’s rate cut and other monetary policy measures to help the economy should help to bring down mortgage rates in the coming weeks, spurring more refinancing. Amidst these challenging times, the savings that households can gain from refinancing will help bolster their own financial circumstances and support the broader economy.
The purchase market was on firm footing to start the year and has so far held steady through the current uncertainty. Looking ahead, a gloomier outlook may cause some prospective homebuyers to delay their home search, even with these lower mortgage rates,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting.
Residential Construction Remains Strong as it Awaits Coronavirus Impact. As anticipated, the two major data sets in February’s residential construction report declined from their January level but both construction permitting and housing starts maintained a significant edge over their performance in February 2019. February permits for residential construction were up 13.8 percent compared to a year earlier. Single-family permits were up 23.3 percent from a year earlier. Housing starts grew by 39.2 percent year-over-year. Single-family starts grew by 35.4 percent from e year earlier. Due to the slowdown in economic growth and the volatility in markets from the coronavirus, mortgage rates will remain lower for longer, which will help homebuyers in the longer run,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “However, we may start to see these home building trends take a turn for the worse, depending on the industry’s ability to continue day-to-day operations during these difficult times.”
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