No doubt, 2020 has been a uniquely challenging year. With unemployment still above pre-pandemic levels, the country coming to terms with longstanding racial inequities, Americans worrying about natural disasters and coming off a contentious national election, and the COVID-19 pandemic still raging, people are searching for reasons to feel gratitude this Thanksgiving.
The housing market has emerged as an economic bright spot. While the nation continues to feel the widespread effects from 2020’s turmoil, here are a few things the real estate industry can be grateful for this year.
1. Booming home sales. Overall, real estate professionals have been busy. Homebuying activity is at its highest level since 2006. Defying high unemployment and an economic recession, the housing market has surged during the COVID-19 pandemic. Existing-home sales in October were 27% higher than a year ago, new-home sales were 32% higher, and pending home sales or contract signings in September jumped 20.5% annually. “This winter may be one of the best winters for sales activity,” Lawrence Yun, NAR’s chief economist, said during last week’s virtual 2020 REALTOR® Conference & Expo. “It won’t match summer or spring sales numbers, but on a winter-to-winter comparison, this could be one of the best breakout years just based on the fact that pending contracts are at such a higher level.” Mortgage applications, up 20% year over year, reflect buyers in the pipeline, ready to buy. The downside: Buyers are in a frenzy to compete for the limited housing stock; 72% of homes that sold in October were on the market for less than a month, NAR’s data shows.
2. Record low mortgage rates. Home buyers are locking in some of the lowest mortgage rates ever in history. Last week, for the 13th time this year, the 30-year fixed-rate mortgage set a record low, averaging 2.72%, according to Freddie Mac. NAR’s Yun predicts that mortgage rates will stay low into 2021, averaging 3.1% for all of next year. “These ultra-low mortgage rates significantly lower mortgage payments, making housing more affordable than a year earlier in many areas,” even with prices rising, writes Nadia Evangelou, a research economist, on NAR’s Economists’ Outlook blog. For example, in the Washington, D.C., metro area, home prices have jumped nearly 12% compared to a year earlier, Evangelou notes. However, the monthly payment on a 30-year fixed-rate mortgage is lower than a year ago, averaging $1,820.
3. Seller equity. Home sellers are getting a boost financially from housing appreciation. The median existing-home price for all housing types was $313,000 in October—a 16% increase from a year ago. Sixty-five percent of 181 metro areas NAR recently tracked have reported double-digit price gains compared to a year ago.
That means home owners who haven’t taken a financial hit from the pandemic are feeling richer. In the third quarter, 16.7 million residential properties in the U.S., or 28.3% overall, were considered “equity rich,” according to a report from ATTOM Data Solutions, a real estate research data firm. A property is considered equity rich when the property owner has at least 50% equity in the home. “Homeowner equity in the third quarter added another pebble to the pile of markers showing that the U.S. housing market continues to defy the broad downturn in the economy this year,” said Todd Teta, chief product and technology officer for ATTOM Data Solutions. “Home prices keep rising, boosting the balance sheets of homeowners throughout most of the country. … The market is strong and homeowners remain in a position to benefit.”
4. Technology. With people forced to keep their distance during the pandemic, technology became real estate pros’ ally in keeping transactions moving. Nick Bailey, chief customer officer at RE/MAX LLC, said during last week’s REALTOR® Conference & Expo that the average real estate transaction takes 181 steps from beginning to end, and technology has increasingly responded to those steps. During state shutdowns earlier this year, real estate professionals increasingly relied on virtual and 3D tours, videoconferencing, augmented reality, automation, artificial intelligence, and remote online notarizations, Jeb Griffin, NAR’s director of strategy and innovation, said during the conference. “Technology is playing a more active role through the buying and selling cycle, and agents are playing an even bigger role to consumers who [have] less access to homes in person [due to the pandemic],” Griffin said. The future now requires “taking the traditional way of doing business and augmenting it with new ways that will allow you to serve customers in a variety of ways—and on their terms,” added Andy Ambrose, DocuSign practice lead director at DocuSign Notary. (Read more: Tech Tools to Help Pros Thrive During the Pandemic.)
5. New priorities. “The coronavirus without a doubt led home buyers to reassess their housing situations and even reconsider home sizes and destinations,” Jessica Lautz, vice president of demographics and behavioral insights for NAR, said about recent findings from the “2020 Profile of Home Buyers and Sellers.” “Buyers sought housing with more rooms, more square footage, and more yard space, as they may have desired a home office or home gym. They also shopped for larger homes because extra space would allow households to better accommodate older adult relatives or young adults that are now living within the residence.” (Read more: NAR Survey Reveals 14 Home Buying, Selling Trends Since the Pandemic.)
6. Affirmation of your value. As Americans reevaluated what they wanted from a home, they increasingly relied on real estate agents to guide them through purchase and sales transactions. Eighty-eight percent of buyers reported using an agent to purchase their home, and 89% of sellers used an agent to help with their sale, according to NAR’s survey. “We are all in unknown territory with this pandemic, so it’s no surprise that more buyers than ever turned to agents to help them navigate through some of the uncertainties and one of the most complex, competitive markets any of us have ever seen,” said NAR’s immediate past president Vince Malta when the Home Buyer and Seller Profile was released.
7. The sanctity of home. “Nothing feels more precious this year than the safety of our homes,” Shannon McGahn, NAR’s chief advocacy officer, told REALTOR® Magazine in addressing advocacy efforts of the association this year, “and we believe all Americans should have equal opportunity to a home of their own.”