Why Home Prices are Still Rising Despite the Global Pandemic
To say the economic news coming out lately has been disconcerting would be an understatement. Statistics concerning job losses, furloughs, and unemployment figures have pointed to upheaval in the global economy as a result of social distancing measures, which were put in place by governments to contain the global COVID-19 pandemic.
But according to recent data from Realtor.com, there is one statistic that should give homeowners (especially potential sellers) some comfort—home prices still appear to be on the rise. In the week ending April 25, the median home list price ticked up by 1.6% annually, compared to one year ago. The data comes from the 99 largest metropolitan areas.
To be sure, price growth was higher a few months ago, when prices were rising by over 4% prior to the lockdown. But this is still a positive sign given the turmoil in other segments of the economy, and could provide reassurance about the stability of the housing market for those considering buying or selling their property.
So why do housing prices appear to be holding steady despite uncertainty in the broader economy?
First, it could be that prices are “sticky”, according to Realtor.com Chief Economist, Danielle Hale:
“The slight increase this week is because prices are sticky. Home sellers are strongly resistant to lowering prices, and they’d gotten really close to declining, so we see a bounce-back. I don’t think this is a return to big price increases.”
The second reason might have to do with the reduction in inventory. The number of homes for sale has been on the decline for years, leading to a much publicized housing shortage in many parts of the country. Low inventory and high demand tends to drive prices up as more buyers compete for fewer houses.
And, after the pandemic hit, available inventory has plummeted. Some estimates put the decline of annual inventory at upwards of 17% compared to last year. Meanwhile, according to the Realtor.com data, the number of new listings has plummeted by a whopping 43.1%.
People are pulling their homes off the market, or waiting to list them because they’re worried about their own economic prospects, concerned with moving during such an uncertain time, or believe that the health risk of having strangers visiting their property isn’t worth it. In any event, listings have slowed, which has helped keep prices of homes that are on the market fairly high.
So, despite the constant deluge of health and economic news, home prices appear to be holding steady. This is good news for anyone who is considering selling, or wants confidence that they’ll be buying a home that has value. It might also give buyers and sellers an edge in a market where many others are choosing a “wait and see approach.”
As always, if you’re thinking about buying or selling a property, or have any real estate questions at all, don’t hesitate to reach out. Even during these difficult times, there are still great opportunities for sellers and buyers.