Most experts predicted that the US would not see a hot spring real estate market in 2020 due to the coronavirus and the economic climate it has created. However, recent data on new home sales for May 2020 shows a major rebound, one experts and players in the US real estate market did not see coming.
US New Home Sales Rebound in May 2020
Earlier this week, the Census Bureau put out its report on Monthly New Residential Sales for May 2020. The market data revealed that new single-family home sales were up 16.6% from April. This equates to a seasonally adjusted annualized pace of 676,000. For April, the pace was only 580,000 units. This ends 3 months of declining home sales in the US housing market in 2020. Not only have home sales surged for 2020, but they are up almost 13% from May 2019.
Experts and economists polled during the height of COVID-19 foresaw a much slower rise in new home sales for May 2020. For instance, Reuters polled economists, asking them for their thoughts on a potential home sales recovery in May 2020. The consensus was that sales would see a minor rebound of only 2.9% to a pace of 640,000 units. (These forecasts were based on the initial reports of home sales for April, which were recorded at a pace of 623,000 units and later adjusted to 580,000.)
Here’s how the major regions of the United States fared in terms of home sales from April to May 2020, according to the report:
- Northeast: +45.5% (up 45.5% from May 2019)
- Midwest: -6.4% (up 2.8% from May 2019)
- South: +15.2% (up 6.3% from May 2019)
- West: +29.0% (up 31% from May 2019)
What Is Driving the Demand for Homes for Sale in the Market?
There are a few likely reasons why home sales have surged beyond expectations during the spring. One major reason is low mortgage rates. After COVID-19 restrictions eased in many locations across the US, buyers rushed into the market to take advantage of historically low rates, hoping to save money on their purchases.
Additionally, stay at home orders caused a lot of pent-up demand for homes – buyers who planned on making a move before the coronavirus hit had to put their plans on hold. These buyers flooded back into the market as soon as they were allowed to it seems.
Finally, other buyers may be worried about a potential shutdown later this year if the second wave of COVID-19 hits the US. Already, as states and cities slowly open up, we are seeing an unfortunate surge in cases in many areas. So another shutdown could be on the horizon. Some buyers are preparing for the next wave, hoping to get their hands on larger homes where they can set up office spaces, comfortably homeschool, and enjoy some outdoor space during quarantines.
Learn more about this trend: Suburban Real Estate Market Boom Due to COVID-19
What This Means for Real Estate Investors
This rise in home sales is generally good news for real estate investors. It shows that the real estate market is not on the verge of a crash as many feared.
If you were hoping to buy an investment property, however, you may find some competition. Again, this will depend on where you’re searching for investment properties for sale. Solely looking at home sales, the Midwest real estate market may be the place to invest, if you want to avoid competition and find a good real estate deal. However, with the right real estate investment tools, you should be able to find and analyze deals quicker than most in the market and make an offer. You can find these tools here at Mashvisor. Check them out now.
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