Housing Market Roundup Nov. 16, 2020

Here’s a roundup of recent housing finance market-related reports:

Resort Towns Becoming Permanent Destinations

Redfin, Seattle, said popular second-home destinations including the Jersey Shore, Cape Cod, Lake Tahoe, Palm Springs and Bend, Ore., are heating up and becoming full-time residences for homebuyers who have the luxury of working remotely.

El Dorado County, Calif., a region spanning from the eastern outskirts of Sacramento to the southern half of Lake Tahoe, came in first place for the second time in a row, while the adjacent Placer County made the top 10 as well. Both are located in the Sacramento metropolitan area, which was the most popular destination for homebuyers looking to relocate in the third quarter, according to an analysis of Redfin.com users. San Francisco was the top origin for out-of-area buyers looking in Sacramento. One other California market—Riverside County, which is home to the desert resort city of Palm Springs—also ranked in the top 10.

Opportunity Zone Home Prices Rise at Slower Pace

ATTOM Data Solutions, Irvine, Calif., released its third-quarter special report analyzing qualified Opportunity Zones established by Congress in the Tax Cuts and Jobs act of 2017. The report found price gains in Opportunity Zones fell below the pace of improvements in broader metropolitan statistical areas throughout the country: every metro area with enough data to analyze in the third quarter showed year-over-year median price increases, while three quarters of those areas saw prices jump more than 10 percent.

The report said housing markets in Opportunity Zones continued improving in the third quarter, even as the coronavirus pandemic spread throughout the nation, damaging large sectors of the American economy. The impact generally hit hardest in lower-income communities that include most of the zones targeted for tax breaks designed to spur redevelopment.

Foreclosure Filings on Rise as Pandemic Threat Persists

ATTOM also released its October U.S. Foreclosure Market Report, showing 11,673 U.S. properties with foreclosure filings, up 20 percent from a month ago but down 79 percent from a year ago.

“It’s a little surprising to see foreclosure activity increasing in spite of the various foreclosure moratoria that are in place,” said Rick Sharga, executive vice president of RealtyTrac, an ATTOM Data Solutions company. “It’s likely that many of these properties were already in the early stages of default prior to the pandemic, or are vacant and abandoned, which makes them candidates for expedited foreclosure actions.”

The report said one in every 11,683 housing units had a foreclosure filing in October. States with the highest foreclosure rates were South Carolina (one in every 6,133 housing units); Nebraska (one in every 6,246 housing units); Alabama (one in every 6,660 housing units); Louisiana (one in every 7,078 housing units); and Florida (one in every 7,208 housing units).

Among the 220 metropolitan statistical areas with a population of at least 200,000, those with the highest foreclosure rates in October were Peoria, Ill. (one in every 1,543 housing units); Champaign, Ill. (one in every 1,674 housing units); Beaumont, Texas (one in every 1,880 housing units); Birmingham, Ala. (one in every 1,993 housing units); and Houma, La. (one in every 2,964 housing units).

Zillow: Intense Buyer Demand Continues to Drive Hot Housing Market

Intense and persistent buyer demand is keeping the time on market for houses at incredible lows and pushing prices ever higher above 2019, according to Zillow’s Weekly Market Report.

The report said sales remain high above last year and are expected to stay robust in the coming months. Key report findings:

Time on market still short as pending sales stay high over 2019

• Robust buyer-side demand persisted through October. For the fourth consecutive week, houses are typically staying on the market for 12 days, a full 17 days faster than last year.
• Pending sales are up 19.7% year over year, though they have slowed 3.1% since last month and 1.3% since last week. 

Scalding homebuyer demand keeps inventory in a vise-grip

• Available inventory fell for the 23rd straight week and is now down 37.4% compared to last year.  Demand for homes is still sky high, while current homeowners cite a lack of confidence in their ability to secure and afford a new home among reasons they’re not selling.
• New listings dropped 7.4% year over year and 7.9% since last week. 

Price growth over 2019 increases as hot market stretches further into fall

• Median list prices have risen further above last year’s figures every week since early May and are now up 11.8% year over year. List prices fell $500 since last week to $345,500 — the first weekly drop since mid-April.
• Homeowners who decide to sell are benefitting from insatiable demand. Median sale prices rose to $289,625 in the week ending September 19, up 12.5% over 2019.

More Than Half of Redfin Offers Faced Bidding Wars for Sixth Straight Month

Refdin, Seattle, said 56.8% of Redfin offers on homes nationwide faced competition in October, little changed from September’s revised rate of 57.4%. While that’s down slightly from the recent peak of 59.3% in August, it represents the sixth-consecutive month in which the bidding-war rate exceeded 50%.

At least half of offers faced bidding wars in 16 of the 24 metros in this analysis. Salt Lake City had the highest bidding-war rate, with 75% of Redfin offers encountering competition. In second place was San Diego, at 73.2%, followed by San Francisco/San Jose, at 69.6%. Austin, which was the second-most popular destination for homebuyers looking to move to a different metro area in the third quarter, was number four.Las Vegas had a lower rate of competition than any other metro area in this analysis, with just 38.2% of offers facing bidding wars in October. It was followed by Miami, Chicago and Detroit, at 38.5, 41.1% and 44.1%, respectively.

Reports Say Renters Having Tough Time

Two reports illustrate the issues many renters face during the pandemic and subsequent economic downturn.

Redfin, Seattle, said 32% of Americans have lost their job or lost wages—or someone in their household has—due to the coronavirus pandemic, according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage. The report features results from a survey of more than 3,000 U.S. residents in October. 

Broken down by homeownership status, 39% of renters reported a lost job or wages, versus 30% of homeowners.

“The pandemic is exacerbating inequality and widening the wealth gap between those who own homes and those who don’t,” said Redfin chief economist Daryl Fairweather. “Renters who have lost jobs or wages are likely dipping into savings for daily living expenses, pushing homeownership further out of reach. More homeowners have been able to keep their jobs, and many who can work remotely are cashing in their home equity to purchase a bigger, better home in a more desirable area.”

In a separate report Rentec Direct, Grants Pass, Ore., said rent payments received nationwide by landlords and property managers dropped 27% since the onset of the pandemic: The number of rent payments received nationwide by landlords and property managers has been consistently declining since the onset of the pandemic, but November saw a slight increase in the number of payments received, up 1% from last month.

The report said tenants are more likely to pay rent online: Of tenants who have electronic rent payment options, rent payments received in November are nearly 2% higher than online payments received for the same period in March. When compared to the 27% decrease in the total number of rent payments received this month, “it is clear that online rent payment options dramatically increase a tenant’s likelihood to pay rent,” the report said.

Clever: Americans’ Spending, Savings, Debt on Rise

Clever Real Estate, St. Louis, said household debt has been on the rise for the past seven years, reaching record highs in 2020. As of the end of Q2 2020, American households held more than $4.1 trillion in non-mortgage debt in the form of student loans (35% of non-mortgage debt), auto loans (29%), credit cards (19%) and other types of loans (20%).

“The ongoing debt crisis put many Americans in a tough spot, as thousands lost jobs earlier this year, while the majority had little to nothing in savings as a safety net,” said Francesca Ortegren, the study’s author.  

The study said 50% of Americans were worried they’d run out of savings after one month. The average American reported having $41,559 in non-mortgage debt and having taken on an additional $7,512 in debt since this time last year.

Redfin Survey: 1 in 4 Americans Want to Live Somewhere Else

Twenty-six percent of Americans said their local government’s response to the coronavirus pandemic has made them want to move away from where they currently live or change where they want to move to, according to a new survey from Redfin, Seattle.  Twenty-one percent of respondents to the October survey said their local governments’ pandemic response has made them like where they live more.

“2020 has made Americans realize just how much power their local governments have over their way of life,” said Redfin chief economist Daryl Fairweather. “If residents of a certain area feel their local rules are too lax or too strict, they may want to move somewhere where the local leadership is more in line with their personal beliefs. And the rise in remote work means some people can move to a different city or state without changing jobs, removing what’s usually a major barrier to relocation. Americans moving to areas more aligned with their political views could make certain counties and states more liberal or more conservative.”

Forty-two percent of respondents would be hesitant to move to an area where most people have political views different from their own, up from 32% in June. And 24% would want to move to a different state if the Supreme Court were to increase states’ rights with respect to health care, gun laws, etc.

Zillow: Strong Buyer Competition Pushing Homes to Sell Above List Price

Zillow, Seattle, said more evidence that persistent buyer demand is pushing a strong housing market deeper into the year than usual, with the share of homes sold above list continuing to rise, blowing past the typical mid-summer peak.

Zillow said in September, 22.4% of homes purchased in the U.S. were sold for more than their initial list price, up from 20.2% in August and well above the roughly 15% of homes that did so during September 2018 and 2019.

Zillow Senior Economist Chris Glynn said it is “highly unusual” for the share of homes sold above list to continue rising this late in the year. In both 2018 and 2019, the share peaked in July during the height of the typical home shopping season before steadily declining as the market cooled in the fall and winter months. This year, the share has increased each month.

Buyer demand has been intense and persistent since the market picked up speed in April after a dramatic slowdown in the early days of the coronavirus pandemic,” the report said. “Potential buyers may be feeling urgency to lock in low mortgage rates now, especially if they sense prices will slip further from reach in coming years. Many others may be taking advantage of new freedom to telecommute from an area where they can more easily afford a home.”

Inventory has continued to fall compared to last year — down 37.4% year over year at the end of October — even as new listings have returned near last year’s level, an indication of heavy sales volume. Homes were typically selling after only 12 days, a full 17 days faster than the same time last year[i]. Those market dynamics are likely pushing buyers to make offers above list price as they expect quick sales and competition from other buyers while choices are limited.

“The housing market is taking us all back to Economics 101 and teaching lessons about supply and demand,” Glynn said. “A persistent interest in buying and moving is creating an imbalance that is driving prices higher than we typically see at this time of year. In many cases, buyers in this market should be realistic about the chance of bidding wars and leave themselves financial flexibility by looking at homes listed for less than their maximum price point.  With tight inventory, low interest rates, and robust demand from households re-evaluating their housing needs, a strong, competitive market with many transactions is likely here to stay into 2021.”