New data continues to reveal the full effect of the coronavirus on the US real estate market. This week, the National Association of Realtors (NAR) reported a drop in the Pending Home Sales Index (PHSI) for March 2020. In what has been dubbed a “frozen housing market”, NAR experts say they expected such a decline amid the COVID-19 pandemic.
A Drop in the Pending Home Sales Index
The PHSI is a key housing market metric that provides insight into future existing home sales statistics. It is a measure of real estate contract activity. According to NAR, a home for sale is typically put under contract a couple of months before it is actually sold. The PHSI measures these contract signings for existing single-family homes, condos, and co-ops.
In March, the PHSI fell to 88.2, a 20.8% drop. Compared to March 2019, this was a 16.3% year-over-year decline, reaching the lowest level since 2011.
The drop in pending home sales was recorded in all four major regions of the US housing market for March 2020:
|Region||PHSI for March 2020||March 2020||YoY|
The Spring Housing Market, US Home Sales, and Prices in 2020
Many real estate agents have quickly adapted to the new housing market under COVID-19. The use of virtual open houses and digital signings has become common practice in many real estate markets across the US. Real estate transactions are taking place in open spaces with parties minding all the necessary precautions to protect everyone involved from the coronavirus.
Still, stay-at-home orders along with the general economic uncertainty that many Americans are facing during the pandemic is slowing down real estate activity. As a result, NAR projects a 14% decline in US home sales for 2020. This is due to the fact that the spring real estate market, which was expected to be a hot one for 2020, will be “missed” according to Lawrence Yun, the chief economist at NAR. However, he also believes that buying activity will pick up as local economies begin to open back up:
The housing market is temporarily grappling with the coronavirus-induced shutdown, which pulled down new listings and new contracts. As consumers become more accustomed to social distancing protocols, and with the economy slowly and safely reopening, listings and buying activity will resume, especially given the record low mortgage rates.
Although the pandemic continues to be a major disruption in regards to the timing of home sales, home prices have been holding up well. In fact, due to the ongoing housing shortage, home prices are likely to squeeze out a gain in 2020 to a new record high. I project the national median home price to increase 1.3% for the year, though there will be local market variations and the upper-end market will likely experience a reduction in home price.
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