The strong data for housing starts and permits in June released last week were just the opening act for the V-shaped recovery in housing. Existing home sales increased 4.72 million for June, up 20.7% from the previous month, according to data released on Wednesday by the National Association of Realtors.
Existing and pending home sales surged in June…
While both single-family home sales and condo sales rose 19.9% and 29.4%, respectively, from May to June, home buyers are favoring single-family homes in the suburbs.
Buyers want more space as homes become offices for the adults and classrooms for the children.
Buyers are looking for more space to accommodate the increasing demands of the home, which have become offices and classrooms for their children as a result of the pandemic.
Despite this trend toward single-family homes, the rise in condo sales is not a significant surprise either. Mortgage rates have continued to drop to the lowest on record, making purchases less expensive.
Additionally, many buyers and potential buyers have not had a significant decrease in wealth as a result of the pandemic. Most of the people who have lost their jobs are those with lower-paying positions, and they tend to be renters rather than buyers in the market.
In addition, the major U.S. stock market indexes have rebounded quickly from their initial swan dive at the onset of the pandemic, with the NASDAQ reaching a record high in recent weeks and both the S&P 500 and Dow Jones Industrial Average less than 10% of off their previous highs.
Despite the increasing demand for housing, supply has remained relatively low. According to Redfin, a national real estate brokerage, new listings from March to June averaged approximately 1.2 million for the four-month period, in comparison with 1.5 million per month for the same periods in 2019 and 2018.
This depressed supply has led to houses selling quickly (approximately 39 days, according to Redfin), and prices continuing to rise.
… as prices increased and supply dwindled
The takeaway
While the market appears to be in a flying “V” formation, the continued pace may be difficult to sustain in the long run given the millions of job losses, recent rollbacks of reopening plans in states and overall uncertainties resulting from the pandemic.
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