Can houses be hoarded?
The number of homes for sale in December was 23 percent below December 2019’s inventory, down to just 1.07 million, the National Association of Realtors said Friday. That is the lowest level in records going back to 1982.
Existing home sales increased 0.7 percent to a seasonally adjusted annual rate of 6.76 million units last month. Economists had forecast a decline of around two percent after several strong months of sales.
“Home sales rose in December, and for 2020 as a whole, we saw sales perform at their highest levels since 2006, despite the pandemic,” said Lawrence Yun, NAR’s chief economist. “What’s even better is that this momentum is likely to carry into the new year, with more buyers expected to enter the market.”
The surge in demand for single-family homes caught the real estate professionals and home builders by surprise. Sales plunged in March and April, due to lockdowns and potential buyers staying away for fear of contracting the virus. The initial surge in May and June was mostly seen as arising from pent-up demand. But as the surge has continued into the winter months, it is now increasingly clear that this is a bigger secular change in the housing market.
Buyers are seeking out a respite from increasingly violent and deadly cities, where murders and shootings have exploded higher. Gun murders were up 31 percent in the United States in 2020. New York City, for example, finished 2020 with a 14-year high in shootings and a 40% increase in murders from the year before. This summer, New York and other cities were beset by riots, looting, and leftwing mobs demanding the defunding of police departments.
Schools and workplaces have also been shut down so that family members are working and learning from home. This puts a premium on space, feeding into demand for larger houses. Many people who once commuted five days a week expect to work only part-time from the office once the virus is contained.
Surging prices and demand are not luring Americans out of their homes. The median price of an existing home sold in December was $309,800, a 12.9 percent jump compared with a year ago. That is the highest median price on record.
The demand is concentrated on the high end of the market. Homes priced between half a million and $750,000 saw a 65 percent increase from one year ago. Homes priced over $1 million are up a jaw-dropping 94 percent from a year ago. Meanwhile, homes at the lowest end of the market, under $100,000, have declined 15 percent.
Many of the buyers are people trading condos and apartments for single0family homes. First-time buyers were 31 percent of sales, below the historical average of around 40 percent.