2021 Housing Market ‘Red Hot’
The past year has been like no other, housing-wise. Near-record-low interest rates, tight housing supplies and greater flexibility in where one lives have pushed a normally predictable housing cycle into uncharted territory, as three new housing reports show.
RE/MAX: Winter Months Leave Buyers Undeterred
RE/MAX, Denver, said its National Housing Report for January saw home sales jump by 13.5% from a year ago.
“The housing market increasingly has shown that buyers, who remain largely unfazed by the challenges presented by an uncertain economy and the pandemic environment, are re-evaluating their current spaces,” the report said. “That could be in part due to historically low mortgage rates and the increasing amount of time we’re spending at home for tasks like school and work.”
The report said January inventory dipped by 12.1% from December to the lowest level of any time in its 13-year history. Year over year, inventory fell by 35.7%–also a report record – and marked the fifth consecutive month of year-over-year inventory declines above 30%.
RE/MAX Holdings CEO Adam Contos said although growth in sales moderated a bit and returned to a more pre-COVID seasonal rate, housing’s record-setting, second-half recovery in 2020 set the stage for what could be a very big year for sales.
“January home sales started the year off with a bang despite the current shortage of homes for sale,” Contos said. “January’s year-over-year sales increase wasn’t as pronounced as what we saw in the back half of 2020, but it was solid by any objective measure – and it signals that 2021 could be an historically good year for housing. Uncommonly low interest rates, the ascent of the millennial homeowner and the prospect of working from anywhere are converging to shape a housing market unlike any other. We could see mortgage rates begin to inch up soon, so now might be an ideal time for homebuyers and sellers to make their move and take advantage of the favorable conditions.”
The report said the January median price of all 53 metro Median Sales Prices was $285,000, down 1.7% from December but up 11.8% from a year ago. The average days on market for homes sold in January rose slightly to 40, up three days from the average in December but down 19 days from the average a year ago.
Redfin January Home Prices Up 14%; Sales Up 20%
Redfin, Seatrtle, reported said the national median home-sale price rose 14% year over year to $330,500 in January. This marks an annual gain just shy of the largest increase seen since 2013, which was 14.5% in July 2013. Closed home sales rose by 20% from a year earlier, while pending sales rose by 37% and new listings fell by 6%.
“The imbalance between supply and demand reached a new high in January,” said Redfin chief economist Daryl Fairweather. “Buyers were eager to make offers and make them quickly to take advantage of historically low mortgage rates while they last. But many homeowners who want to move feel stuck with limited options of homes to move to, frustrated about homes finding buyers within hours of hitting the market and defeated after repeatedly losing out in bidding wars. People who are committed to finding a home this season should plan for the harsh reality that they may need backup homes in mind when they go on a home tour and when they submit an offer, or be prepared to wait weeks or months for another ideal home to hit the market.”
The report said median prices increased from a year earlier in all 85 of the largest metro areas Redfin tracks. The smallest price gains compared to a year earlier were in San Francisco (+3%) and New York City (+5%). The largest price increases were in Camden, N.J. (+29%), Allentown, Pa. (+26%) and Detroit (+25%).
Home sales were up 20% in January from a year earlier on a seasonally-adjusted basis, down from the record high of 25% set in October, but still the third-highest gain on record since at least 2013. The number of homes sold in January was up from a year earlier in all but five of the 85 largest metro areas Redfin tracks. The largest gains in sales were in San Francisco (+44%), San Jose, Calif. (+43%) and Bridgeport, Conn. (+42%). The metro areas where home sales fell the most were Grand Rapids, Mich. (-8%) and Denver (-2%). Sales were down less than 1% in Detroit, Memphis, Tenn., and Salt Lake City.
Active listings—the count of all homes that were for sale at any time during the month—fell 24% year over year to their lowest level on record in January. This also marks the largest year-over-year drop on record, and the 18th-straight month of declines. Redfin reported the typical home that sold in January went under contract in 34 days—22 days fewer than a year earlier.
Additionally, the report said in January, 33% of homes sold above list price, down slightly from the peak of 35% in November but up from 19% a year earlier.
Zillow: Intense Demand, Low Mortgage Rates Drive Home Values to Record Highs
Zillow, Seattle, said extreme demand driven by exceptionally low mortgage rates, demographic pressures and pandemic trends kept the housing market boiling as we moved into 2021, according to its latest market report.
Zillow said monthly appreciation of home values in January matched recent record highs, while annual growth is higher than any time since 2006. Home sales moved briskly, with homes typically staying on the market for 18 days as of mid-January before the seller has accepted an offer from a buyer — 28 days faster than in 2020 and 2019. For-sale inventory declined again in January, and now stands 26.3% below levels from a year ago.
The Zillow Home Value Index rose to $269,039 in January, up 1.1% month over month, matching December’s record for monthly growth in data reaching back to 1996. Annual home value appreciation rose to 9.1% — the largest annual growth recorded since June 2006, before the Great Recession.
“Homebuying demand has pushed the pedal to the metal for price appreciation this winter,” said Jeff Tucker, senior economist at Zillow. “Normally we’d be talking about the spring selling season ramping up, but it looks more like last summer’s selling season simply never ended. Buyers eager to secure more space and lock in today’s rock-bottom interest rates are having to move quickly and aggressively to win out in this competitive market.”
Home values rose in all 50 of the largest U.S. metros, with the most drastic yearly growth in Phoenix (17.1%), San Jose (14.2%) and Austin (13.7%). The slowest growth — a relative term in this case — was seen in San Francisco (5.3%), Chicago (6.7%), and San Antonio (6.7%).
Tucker noted several major demand drivers are keeping competition high and the market hot through the customarily cool winter. For one, a wave of millennials are now entering their peak home-buying years. The number of Americans aged 25-34 was 12% higher in July 2020 than July 2010, according to Census estimates — an increase of nearly five million people. Additionally, the COVID-19 pandemic and widespread changes to work-from-home policies have also pushed many to reconsider what they want and need in their living space, and where it should be.
Zillow reported while home prices are rising quickly, rents are relatively stagnant. The Zillow Observed Rent Index inched up to $1,721 in January, just 0.5%, or $9, higher than a year ago and up 0.3% month over month.
Rents in many expensive, coastal metros are currently much lower than a year ago — down 9.2% in San Francisco, 8.8% in New York, 7.2% in San Jose and 6.3% in Boston. Many Sun Belt and Midwest metro areas, on the other hand, saw solid rent growth. Phoenix led the largest 35 metro areas with 8.4% annual rent growth, followed by Sacramento (7.6%) and Indianapolis (6.9%).