Once upon a time, the seasons ruled real estate markets. Home sales opened in March (later in northern states), and the primary season for selling and buying ended in August because families with young children would want to be settled in their new homes before the school year opened. Fall was a time when bargain hunters picked over depleted listings looking for desperate sellers struggling before the holidays shut down local markets for the year. New listings in October or November often were signs of buyers desperate to sell.
Arriving at the very dawn of the 2020 season, the pandemic changed housing market patterns for the balance of the year. After about six weeks of confusion in March and April, in June, buyers flooded the real estate markets, hoping that the pandemic would deter competitors and make it easier to buy the best listings. June sales jumped 20.7% from May, but many sellers—even those while pricing and staging their homes—waited to see what would happen.
Seasonal Trends Are Two Months Late
Social distancing didn’t drive buyers away. Virtual tours, drive-by appraisals, e-closing, contingency clauses and other relatively minor adjustments showed how far real estate has come. Technology has transformed the residential transaction. The pandemic demonstrated that people could buy and sell homes in a virtual world.
The pandemic set the spring sales season back by at least two months. Not until July did large quantities of homes that had been slated for the spring market come on market. Demand was so strong that new listings sold as fast as they arrived, and by the end of the month, inventories were still 21% below levels in 2019. July sales soared by nearly 25%, and first-time buyers accounted for 34% of sales, up from 32% in 2019.
The stage is set for a great fall market. The COVID-19 pandemic is still running wild in many states and local economies still struggle to get by. Unemployment is in the double digits. Millions of homeowners and buyers face challenging times. Despite these barriers, the final quarter of the year may be the time to make a move.
Here are Five Reasons Why the Fall Market May Be a Good Time to Sell
- Insanely low rates aren’t going away anytime so, but they will eventually. Rates dipped below 3% once or twice in August and July, but it seems that the nation’s pandemic riddled economy is going to keep them lower than anyone can remember for at least the balance of the year. Rates might even drift lower before the year ends. Soon, no one under 30 will remember when getting a mortgage below 4% was considered a once in a lifetime opportunity.
“House-buying power, how much home one can afford to buy given household income and the prevailing mortgage rate increased 15% since July 2019. The house-buying power surge was driven by the combined impact of lower mortgage rates, which were 0.75 percentage points lower in July than they were a year ago, and a continued increase in annual household income,” says Mark Fleming, chief economist of FirstAmerican. “The increase in house-buying power boosted market potential by approximately 282,000 home sales.”
- Pent up demand is igniting the long-anticipated Millennial boom. Has the long-awaited Millennial boom finally arrived? Weeks of locked down isolation are reminding thirty-somethings that they planned to own their own homes a few years ago. Millions have been surfing listings for months, even years, waiting for the right time―which is now. “Millennials, long viewed as perennial home renters who were reluctant or unable to buy, are now emerging as a driving force in the U.S. housing market’s recent recovery,” reports Nicole Friedman of the Wall Street Journal.
Some 15.5% more contracts were signed in July than in July 2019. By Labor Day, real estate markets looked like the Fourth of July. Fireworks were still flying in real estate markets coast-to-coast. Applications for mortgages to buy a home in the last week of August, typically one of the very slowest weeks of the year were up 28% over 2019.
“The recently observed increase in purchase demand is largely due to pent-up demand as buyers are acting now after delaying purchases in the spring. We are, however, seeing some early signs of shifting buyer preference to locate to lower density areas, potentially driving some additional purchase activity. Here, our baseline forecast sees purchase volumes of $1.3 trillion in 2020,” said Fannie Mae Chief Economist Doug Duncan in mid-August.
- Prices are still rising. The July price gain was the largest in two years, according to CoreLogic. Based on sales contracts signed in August, the outlook is good for closed sales price increases of 5% or more in the near future.
Darren Blomguist of Auction.com told MarketWatch that housing markets are on a “sugar high.” “Prospective buyers will be better positioned for success as homeowners if they understand that this sugar high will not last, and make sure their decision to buy is grounded in longer-term factors that will affect their ability and willingness to commit to paying down a sizable amount of debt over the next 30 years,” Blomquist said.
- The “wealth effect” is making it easier for move-up buyers this fall. “As homeowners gain equity in their homes, they are more likely to consider using that equity to purchase a larger or more attractive home – the wealth effect. In today’s housing market, fast-rising demand against the limited supply of homes for sale has resulted in continued house price appreciation,” said Fleming. “Compared with one year ago, the growing wealth effect caused by house price appreciation increased housing market potential by nearly 105,000 potential home sales,” says FirstAmerican’s Mark Fleming.
- Supplies are still extraordinarily low, and there is plenty of room for a lot of new listings. By scaring away sellers, the pandemic has converted sellers’ markets into super-sellers’ markets. New listings have not wholly recovered from the shock of the pandemic, and most markets can absorb a lot more. In July, pending sales, new listings were down by double digits from 2019 and inventories were off more than 30%.
To sum it up, NAR Chief Economist Lawrence Yun expects existing home sales to continue to rise to 5.8 million per year in the final months of the year and reach 5.86 million in 2021. “We are witnessing a true V-shaped sales recovery as homebuyers continue their strong return to the housing market,” says Yun. “Home sellers see their homes go under contract in record time, with nine new contracts for every ten new listings.” Yun says there are no indications that contract activity will wane in the immediate future, particularly in the suburbs.
Most experts foresee a fall housing market, unlike any before, and so far, the data support them. Should you be one of those homeowners who planned to sell this year and was scared off by the pandemic, or perhaps you are thinking about listing your house next spring and could expedite your plans, take a hard look at selling now. With the election coming up and COVID-19 staying for longer than expected, the six-month crystal ball is very cloudy.