Today the National Association of Realtors reported existing house sales for the month of December were at 6,760,000, a beat of estimates. This likewise closed the books on 2020’s real estate market as we completed out the year at 5,640,000 total existing-home sales– a 5.6%boost from the exact same month in2019
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Instead of thinking about completion of 2020 and going into 2021 as a hot sales market, this boost over December 2019 sales might be more properly analyzed as an end-of-the-year bump due to “cosmetics sales” for sales missed out on throughout the COVID shutdown in the spring of 2020..
The COVID crisis of 2020 was responsible for a lot of abnormal metrics in the real estate market. Data lines that are typically very sticky, i.e. take months to move considerably in either instructions, took waterfall dives, and after that made parabolic recoveries– the existing house sales numbers are an extreme case of this.
When I consider the 2020 real estate market, the big take-home is not the V-shape recovery in many of the real estate metrics and even the hotter-than-expected cost development. The huge take-home is that 2020, regardless of the COVID crisis, began a period in our nation (the years 2020-2024) when we have both the very best housing demographics ever integrated with mortgage rates low enough to keep housing steady for years to come.
We saw hints of this prime real estate market duration as early as February of2020 The existing house sales report at that point was trending at 300,000 above my highest sales variety for the year.
Throughout the summer of 2020, I composed that, based upon the February existing-home sales data, if we didn’t end the year with 5,710,000– 5,840,000 in existing house sales then, it would be due to the fact that the COVID crisis prevented some sales from taking place. I think we are still making up for lost need and this is why the regular monthly sales information are still so high. This suggests that we can anticipate existing-home sales information to moderate in the coming months, even getting back to 6,200,000 on these month-to-month prints, when this makes up demand is tired.
The key is not to overreact to this drop. If we don’t get to 6,200,000 or lower in the 2021 month-to-month sales print, then demand is better than I thought.
Likewise covered in the NAR report was real estate stock. Inventory is at lowest levels of 1.9 months. For context, inventory does tend to fall towards the end of the year and stay low up until spring. Even accounting for that we are at all-time lows. Compared to the previous year, days on market fell significantly from 41 days to 21 days. Cash purchasers and sales to financiers likewise fell compared to the same month of the previous year. Home loan need picked up in 2020.
The MBA’s purchase application data for the last 3 weeks have revealed nothing but favorable development compared to the exact same period last year. Today’s report has revealed growth of 15%, and the previous two 10%, and 3%. I am looking for trend development to be between 1%-11%year over year so for now, everything looks about. Anything above 11%trend development I would thought about real estate is surpassing again in2021
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Simply bear in mind that the year-over-year information is going to look abnormally strong after March 18 since that was the duration in 2015 when the market was essentially frozen due to COVID. So, change your take on real estate to those 9 weeks after March18 All in all, this report reveals a great year in 2020, even with COVID-19, mom demographics and low mortgage rates dominated.
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