A home’s real estate for sale sign that the home is under contract in Washington, DC, November 19, 2020.
Saul Loeb | AFP | Getty Images
Demand driven by pandemics sent total home sales in 2020 at the highest level since 2006.
Even the most avid buyers still bump into barriers in the housing market today. The record low supply and record high prices limit the exceptionally high demand.
According to the National Association of Realtors, sales of existing homes increased by 0.7% in December from November to a seasonally adjusted annual rate of 6.76 million units. Sales were 22% stronger than in December 2019.
Just as unexpected as a global pandemic was, so was the reaction of homebuyers. After falling in March and April, sales suddenly began to climb. The total sales volume at the end of the year ended at 5.64 million units, the highest level since 2006 and much stronger than predicted before the pandemic. Buyers are driven by a desire for larger, suburban homes with dedicated spaces for work and schooling.
“Home sales could potentially reach $ 8 million if we have more inventory,” said Lawrence Yun, chief economist at the realtors. “Mortgage rates should remain very low during 2021, although we have already seen the lowest.”
Strong demand exacerbated a low supply of homes for sale at the beginning of the year. At the end of December, the stock amounted to just 1.07 million homes for sale, a decrease of 23% over the year. At the current point of sale, it is a stock of 1.9 months. This is the lowest number of homes since realtors began tracking this measure in 1982.
The low supply and the strong demand continued to increase the heat below the house prices. The average price of an existing home sold in December was $ 309,800, an increase of 12.9% compared to December 2019 and the highest average median price in December.
Part of the sharp rise in the median price is that home sales on the higher end of the market are stronger, where there is more supply. Home sales priced below $ 100,000 fell 15% annually in December, while home sales between $ 500,000 and $ 750,000 rose 65% annually. Home sales of more than $ 1 million have risen 94% from a year ago.
Steep competition for homes also has more buyers doing cash offers.
First-time buyers accounted for 31% of sales. They usually make up about 40% historically.
It also took an average of just 21 days to sell a home in December.
“This is unusual because we see the market increase every year during the holiday season, but not this year,” Yun said.