The summer housing market is here
Most years, summer is a great time for home sellers.
That’s because buyer competition typically heats up from May through August.
This year, though, COVID-19 has changed the way the real estate game is played.
Could those changes be enough to flip the summer market in favor of home buyers? For some, the answer might be yes.
Experts are split, but they agree on one thing: No one can say for sure how the market will move in the coming months.Verify your home buying eligibility (Sep 22nd, 2020)
Summer is normally a seller’s market
A recent report by ATTOM Data Solutions had some interesting findings:
- Sellers reap the greatest home sale premiums as the weather warms up
- The months yielding the highest premiums are: June (9.6%); May (8.3%); and July (7.3%). August yields a 6.0% premium
Overall, says ATTOM, home sales completed in May, June, and July usually net 7% to 10% above market value.
That equates to roughly $17,000 to $25,000 extra for sellers.
Judging by the numbers, it would appear that sellers have a solid leg up on buyers in the summer months.
Could COVID-19 change the home buying equation?
Some experts think that the coronavirus could alter the usual summer housing market patterns.
Consider that the aforementioned data is based on sales between 2011 and 2019. This year is a hard one to predict for numerous reasons — most of all a pandemic that’s likely to have long-lasting effects.
“We are in uncharted territory,” says Caleb Liu, a real estate investor and owner of House Simply Sold.
“The longer this pandemic lasts, the more economic damage it may cause. Many sellers may be forced to sell their homes. That means an increased housing supply. And when inventory goes up, prices fall.”
That doesn’t necessarily mean homes will go on super-sale.
“But if the pandemic extends into the second half of 2020, I believe prices will start to drop,” says Liu.
“If the pandemic extends into the second half of 2020, I believe prices will start to drop” –Caleb Liu, Owner, House Simply Sold
Real estate attorney Rajeh Saadeh also feels buyers may have more leverage than many expect this summer.
“The economy is still relatively strong. And the buyer pool this year will likely be smaller due to job and income loss. Those factors can help give buyers the advantage,” explains Saadeh.
Kevin Martini is a senior mortgage strategist and branch manager at Benchmark Mortgage. He points to another factor in buyers’ favor.
“A home buyer will have a buying power surge this summer if the current mortgage rate environment doesn’t shift higher,” notes Martini.
Remember that mortgage rates recently hit all-time lows. Plenty of pros expect this historic low-rate environment to continue over the rest of the year.Verify your new rate (Sep 22nd, 2020)
Don’t underestimate sellers’ advantages
Others, however, insist that sellers hold the best cards this summer. Count Nadia Evangelou, senior economist and director of forecasting for the National Association of Realtors (NAR) among them.
“With the lack of inventory today, I don’t think the coronavirus will change the dynamics in the real estate market and give the upper hand to buyers.
“With the lack of inventory today, I don’t think the coronavirus will… give the upper hand to buyers. Right now, we have a housing shortage.” –Nadia Evangelou, Senior Economist, NAR
“A market favorable to buyers can happen when there are more homes for sale than there are buyers in the marketplace. And right now, we have a housing shortage,” she says.
Remember, too, that “because of the pandemic, construction has been halted in some areas,” Evangelou adds.
“While the target is to have five to six months of housing supply, today it’s under four months.”
How the coronavirus will impact home prices
Despite the pandemic, prices on homes for sale are rising or holding their own.
“Listings are still garnering strong demand from potential buyers. And in many markets, it’s not uncommon to encounter multiple offer situations,” says Liu.
Based on the NAR’s latest numbers, home prices on existing single-family homes for sale in March were still solidly strong, rising 8% compared to a year earlier.
Evangelou expects prices to remain stable in the months ahead.
“That’s due to the pandemic-induced reduction in inventory and less immediate concerns about foreclosures,” she says.
“Based on our Flash Survey results, potential buyers and sellers are indicating they may simply delay the process for a couple of months. But coming to 2021, prices are expected to rise 3% to 5% because of pent-up demand.”
Why now is a good time to buy
The bottom line? If you’ve got stable employment, good credit, and enough cash for the down payment, closing costs, and mortgage payments, the summer could be a great time to purchase.
“Now is an excellent time to buy a home, especially for cash buyers and those who can obtain a low interest rate loan,” says Saadeh.
“In high-end markets, this drop [in mortgage rates] can cause monthly payments to be reduced by nearly $600” –Nadia Evangelou, Senior Economist, NAR
Suzanne Hollander, a Florida International University real estate faculty and attorney, concurs.
“Interest rates remain enticingly low,” says Hollander. “And if you live in a condo or apartment with common areas and are worried about coronavirus risks, a detached single-family home with your own yard might be just the place for you.”
Based on Evangelou’s calculations, the monthly payment for a typical home ($280,600) drops by nearly $150 when rates fall from 4% to 3%, which recently happened.
“And in high-end markets, this drop can cause monthly payments to be reduced by nearly $600,” says Evangelou.Verify your new rate (Sep 22nd, 2020)
Why now is a good time to sell
Saadeh says it’s currently a fantastic time to unload a property, too.
“Now is an excellent time to sell a home, even if you need to buy another home. An attractive property marketed and priced properly will attract multiple strong buyers,” says Saadeh.
“They can borrow at very low interest rates and compete with one another—consequently driving up your price.”
Evangelou seconds those sentiments.
“Our Flash Survey reveals that 73% of our members reported that sellers aren’t reducing the price to attract buyers.”
“Plus,” she says, “undersupply typically leads to rising prices and more competition among buyers. So yes, it’s a good time to sell,” she says.
What are today’s mortgage rates?
Mortgage rates hit record lows more than once this spring. And buyers have generally seen even lower rates than refinancers.
So if you’ve been waiting for rates to fall, and have the job stability to buy during COVID-19, now could be the time to make your move.Verify your new rate (Sep 22nd, 2020)