April 2021 Existing and Pending Home Sales
April 2021 Existing and Pending Home Sales
Hello, I am Lawrence Yun, chief economist with National Association of Realtors®. The latest housing statistics. Well, the one-word description is that the market is hot, as median home price reach all-time high and furthermore price gain being 19% from one year ago, strongest ever price appreciation. However, home sales actually fell for the third straight months, running at 5.85 million annualized pace in April it had been above six million, so now on an annualized basis it’s coming down. From one year ago, it is still up significantly — 33% from April of last year — but let’s take note, it is an artificial comparison, April of last year was a lockdown period, so it’s better to compare to momentum and the momentum on the sales are falling, even though home prices are going straight up.
So what is happening, or the reasoning behind it? Very simple: lack of inventory. The REALTORS®, brokers, everywhere across the country are saying market is hot. If they had 20% more inventory, hypothetically, they would have 20% more home sales, as simple as that. More inventory means more home sales but due to the lack of supply, it is holding back sales potential. One interesting development is that only the Midwest region saw a sales gain. Now that could be due to the fact that the Midwest region is the most affordable region of the country and for some workers who are flexible enough who are able to move and work from anywhere, maybe they’re seeking more affordable regions of the country.
We’re also seeing the condominium market bouncing strongly. The condominium market, one year ago during the lockdown, really collapse while single family did relatively better. But now with people understanding the social distancing measure, along with more people getting vaccinated, they are more comfortable in a shared unit, shared elevators, shared common spaces, so the condominium market actually saw an increase even though single-family home sales declined. Both property types, prices rising, hitting all time high. Another interesting development is that vacation home sales are showing interest. Eight percent of all transactions in the latest month. Usually it would be 4%, 5%, bouncing around at that level. But now, 8% of all transactions, clearly implying that either people want to have extra property, perhaps as an inflation hedge, or, work from home can simply be, work from vacation home. So, vacation home rising strongly in the latest month. Generally for vacation home property or second home property, the mortgage availability is more difficult, so cash transaction has risen as well.
One year ago, 13% of transactions were all cash, latest data: 25%, essentially doubling from one year ago. It could also be due to the fact that multiple offers are very prevalent and one way to show that the offer is a solid offer is to offer cash. We are finding for a typical listing across America there are five offers — incredibly high number! Half of the homes are being sold above list price. So the market is very, very high, we simply don’t have sufficient supply. When will the market calm down? I believe late autumn, as we enter the winter months, things will calm down. First, seasonally, we notice the pattern, but also that home builders are building more homes, but it takes time before it reaches the market. So based on the timeline of what the builders are producing currently, and when it will be completed, I would say late autumn, early winter, things should calm down when the multiple offer frenzy, is not as intense as currently is the case and maybe prices will rise only about 5% from one year before at that time.
But in the meantime, the economy looks strong. One concerning factor is, because of the strong economy, inflation is beginning to pick up strongly. Gasoline prices at six-year high, certainly eating through REALTORS®' pocketbooks, because REALTORS® need to drive frequently. But we are also seeing that the moving trucks, storage, along with the appliance cost running way above average, uh reaching above 6%, 8%, 9%, above one year ago, so please advise your clients, uh about other aspect of home buying. Things like moving truck, appliances, prices rising strongly. So, we need more supply, I think we will steadily get more supply by autumn and winter months, and hopefully this trend will continue into 2022. Thank you for listening, and best to you all.