It’s easy to see that the housing market has remained strong throughout the pandemic, but quantifying that impact is no easy task. That kind of data crunching can help explain what happened, and what’s likely to happen in the near future. It’s also the kind of analysis that HouseCanary has done, with results that show the full-impact of the pandemic on housing.
HouseCanary is a data analytics company with a focus on residential property valuations. Founded in 2008, the San Francisco-based company has put together a database of information on homes, mortgages, and neighborhoods across the U.S. and it uses that data to provide value-based solutions for people in the real estate industry.
In this report, HouseCanary analyzed single-family listing volume, new listings, and median listing price information in 41 states and 50 metropolitan areas for a two-year period -- from March of 2019 to March of this year. The report is called: “One Year Later: Understanding COVID-19’s Impact on the U.S. Housing Market.”
The results show five important trends that took hold during the pandemic. According to the company’s principal data scientist, four of those trends aren’t going away anytime soon.
The first trend is a huge drop in inventory that occurred during the second year of the analysis. HouseCanary says that U.S. inventory dropped 32.5% from March 2020 to March 2021. That’s a record decline in housing supply which is partially due to problems faced by builders, including supply chain constraints and skyrocketing prices for lumber and other building materials.
The results show that South Carolina experienced the biggest year-over-year drop in inventory, at more than 50%. Utah was next with a 44% decline. Illinois was third with an inventory drop of 43%. Homes that were priced below $400,000 were more heavily impacted by that squeeze.
That also put the squeeze on the number of single-family homes that are available for rent. HouseCanary says: “From a peak in November 2020, the total number of listings available for rent dropped 46.8%.”
The second trend is that demand for single-family detached homes has grown stronger. Record-low mortgage rates helped drive that demand, along with pandemic-related needs for home office space and private yards. HouseCanary says that listings under contract rose 4.5% during the year of the pandemic, while net new listings were down 3%.
Third on the list of trends is the speed at which Americans closed their deals. HouseCanary says the median number of days that homes were on the market during the pandemic was 12 days less than the same period in 2019.
The fourth trend is that prices have soared because of an imbalance between supply and demand. The median listing price is up 15% for the nation. Because of the competition for homes and bidding wars, the median closing price is up higher. It jumped 18.7%.
Rents have also climbed because of the supply-demand imbalance. HouseCanary says the median listing price for active rentals was up 7.4%. It was $1,938 in March of 2020 and grew to $2,082 in March of this year.
The fifth trend is that forbearance rates hit a record high during the pandemic. They peaked last June and have been declining slowly since then. That’s one trend that is disappearing, but HouseCanary expects the others to continue into the foreseeable future.
The company’s principal data scientist Brittany Murphy says the inventory problem is not something that can be fixed quickly. She said during a Bloomberg interview that: “It’s not just a switch we can turn on… so this sustained supply drop is something that we have settled into and it’s now going to constrict supply and increase prices for the near-term future.”
And while there will be constraints to deal with, the housing market is expected to remain strong. The report lists several tailwinds that will keep the housing market floating above ground including high homeowner equity, increased household formation among millennials, the need for a real estate hedge against inflation, increased institutional investment, a recovering job market, a strong economic rebound, an abundant money supply (due to all that stimulus), and a work-from-home trend that’s not going away.
As for low interest rates, we still have them but there’s more chit-chat about inflation and how that will impact short- and long-term interest rates. Murphy says that if we do see increased rates, that will bring the demand down a little, although she expects to see a lot of older, well-capitalized buyers who may not be affected by slightly higher rates.
You can check out the report yourself by following links on the podcast player page for this episode at newsforinvestors.com.
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