Housing Market Stays Hot as Sellers Gain Upper Hand

The U.S. housing market heated up even more during the four-week period ending August 23, said Redfin, Seattle, with strong sales and price growth unfazed by seasonality.

The seasonally adjusted Redfin Homebuyer Demand Index increased by 29% from pre-pandemic levels in January and February. The biggest change from recent weeks is the number of new listings, which rose by 4.1% from a year earlier—the strongest gain since March. However, the number of homes actively listed for sale during the period was still way down (28%) from the same period a year ago. Active listings have been down 20% or more from a year earlier since the four-week period ending May 31.

“A lot of the homebuyers I’m working with also have a home they need to sell, but they feel stuck,” said Milwaukee-area Redfin agent Melissa Killham. “Low inventory and a competitive market is making potential sellers afraid to put their house up for sale. They are worried that they won’t be able to buy a home using an offer that’s contingent on the sale of their current home, or that if they sell first, their home will sell before they find something to buy and they’ll have nowhere to live in between.”

Pending home sales for the four-week period came in much higher again from a year ago, up by 20% despite an ongoing seasonal decline over the past few weeks. This represented the largest year-over-year increase in pending sales since the four weeks ending October 25, 2015.

Baltimore Redfin agent Tim Maller said because growth in homebuying demand (as measured by pending sales, up 20%) continues to dwarf growth in supply (as measured by new listings, up 4%), there seems to be no end in sight to the upward pressure on home prices.

“More new listings are hitting the market than a year ago, but homebuyer demand is outstripping it,” Maller said. “There was a brief lull during the height of the coronavirus outbreaks, but now the number of new listings of homes for sale is back to normal. On the flip side, there are a lot more buyers looking right now than we would typically see.”

Redfin reported home prices rose by 11% from a year earlier for the four-week period ending August 23. In 2018 and 2019, the median home sale price peaked during the four-week period ending in the first week of July, declining 2.4% and 1.9% between that period and mid-August. This year over that same period, home prices have increased 5.6%.

Redfin said buyers in the market today will find homes selling more quickly and closer to list price than ever before. Of homes that went under contract during the four weeks ending August 23, 46.6% found a buyer within two weeks of hitting the market—the highest level Redfin has seen since at least 2012 (as far back as its data is available). During the same period last year, 32.5% of homes found a buyer within two weeks.

“This market is really squeezing first-time homebuyers at lower price points pretty hard,” Maller said.

“Many homebuyers are waiving home inspections, appraisals and everything they possibly can to try to win in a bidding war,” Killham said. “The busy season for real estate seems to be prolonged this year. Usually things have slowed down by now, but homes are still flying off the market, sometimes before you can even see the properties.”

The report said the average sale-to-list price ratio increased again to a record-high 99.2%, up from 98.3% during the same period last year. Year-over-year changes of nearly a full percentage point in this measure are very rare—last seen in early 2013 as the housing market was finally bouncing off the post-recession bottom.

“It seems like nothing can stop the housing market from charging forward with rising prices and increasing sales right now,” said Redfin chief economist Daryl Fairweather. “Uncertainty around the election, ongoing concerns about the pandemic, high unemployment with expanded benefits that have expired… none of that seems to matter to real estate. If there are dark clouds on the horizon right now for the housing market, you really have to squint hard to make them out.”

The report can be accessed at https://www.redfin.com/blog/housing-market-posts-more-strong-gains/.