By Nicole Friedman
U.S. home sales in 2020 surged to their highest level in 14
years, fueled by ultralow interest rates and a pandemic that sent
buyers scrambling for more spacious homes to accommodate remote
work.
Robust home sales in the second half of the year surprised many
economists while offering a rare bright spot for an economy run
aground by closed businesses and mounting job losses during the
Covid-19 pandemic.
Pandemic-driven job losses were concentrated in lower-paying
industries, while households with higher pay and the resources to
buy a new home weathered the downturn better. The pandemic prompted
many of them to leave big cities for suburbs or smaller towns,
while record-low borrowing rates made the decision to trade up
easier. Once shelter-in-place restrictions eased, sales took off in
June and have rarely flagged since then.
"It's totally because of the pandemic," said Brittany McCreary,
who with her husband last month bought their first home, a
four-bedroom stone farmhouse, in York, Pa., after leaving the
Chicago area. "We're glad we're not renting anymore. We always
wanted to buy."
Existing-home sales rose 0.7% in December from November to a
seasonally adjusted annual rate of 6.76 million, the National
Association of Realtors said Friday. The December sales marked a
22% increase from a year earlier.
Strong house-buying demand is expected to continue this year,
economists say, spurring more economic activity like home
construction and sales of furniture and home goods. But a shortage
of houses for sale is pushing home prices higher, making it
costlier for renters trying to enter homeownership.
"Homeowners are smiling, because they are seeing price
increases," said Lawrence Yun, NAR's chief economist. "The
frustration is coming from the first-time buyers."
Existing-home sales, which make up the bulk of the housing
market, totaled 5.64 million in 2020, up 5.6% from 2019 and the
highest level since the 2006 pace of 6.48 million, NAR said.
Economists say today's housing market is less risky than during
that boom 14 years ago. Mortgage lending standards are tighter, and
the supply of homes on the market is lower relative to demand. Many
homeowners facing financial difficulties can also take advantage of
current policies allowing them to skip monthly payments and make
them up later.
The housing market was poised for a strong year in early 2020,
as interest rates fell and the large millennial generation
continued to age into its prime homebuying years. Home sales then
plunged in the spring due to widespread shelter-in-place
restrictions, before quickly rebounding in the summer and fall.
"The real important driver has been the record low level of
mortgage rates...which really enhanced affordability for home
buyers," said Frank Nothaft, chief economist at housing-data
provider CoreLogic Inc.
For the week ended Thursday, the average rate on a 30-year fixed
rate mortgage was 2.77%, down from 3.6% a year earlier, said
Freddie Mac.
While demand has climbed, supply remains tight. Sellers remain
wary of listing their homes for sale, partly due to concerns about
virus transmission, real-estate agents say.
There were 1.07 million homes for sale at the end of December,
down 23% from December 2019, according to NAR. At the current sales
pace, there was a 1.9-month supply of homes on the market at the
end of December, a record low.
That inventory crunch has spurred new-home construction. Housing
starts, a measure of U.S. home-building, rose 5.8% in December from
November to the highest seasonally adjusted annual rate since 2006,
the Commerce Department said Thursday. Home builder confidence in
the single-family housing market rose to record highs in the second
half of last year, too.
The median existing-home price rose 12.9% in December from a
year earlier to $309,800, near the record $313,000 reached in
October, NAR said. For the year overall, the median price rose 9%
to $296,500.
Still, the housing market's momentum is expected to continue as
mortgage rates remain low. Increased vaccination rates could prompt
more sellers to enter the market later this year.
"There's still demand that's not being met," said Doug Duncan,
chief economist for Fannie Mae.
For the full year, existing-home sales rose the most in the
South, at 7%, and in the Midwest, at 6.4%. The South also posted
the biggest year-over-year gain in 2019.
In Charlotte, N.C., demand is robust from buyers moving from
other states seeking a cheaper cost of living, said Wendy Dickinson
of Coldwell Banker. First-time buyers are also eager to take
advantage of the low rates, she said.
"When houses hit the market here, it's very, very typical for
them to go into multiple offers immediately," she said.
News Corp, owner of The Wall Street Journal, also operates
Realtor.com under license from NAR.
Write to Nicole Friedman at nicole.friedman@wsj.com
(END) Dow Jones Newswires
January 22, 2021 16:28 ET (21:28 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.