February 2021 Existing and Pending Home Sales

February 2021 Existing and Pending Home Sales

Apr 8, 2021
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Inventory challenges remain with record low inventory and record low days on market. More housing supply is needed to tame price acceleration.

Hello. I am Lawrence Yun, chief economist with the National Association of REALTORS®. And how is the housing market developing? Well, record low inventory, so that was the figure for the month of February and the largest-ever decline year-over-year. Thirty percent reduction in inventory compared to February of 2020.

Remember, February of 2020 is before the onset of the pandemic, so we are comparing before the pandemic to today, and inventory level we have never seen this low activity.

Only two months supply. Normal, balanced market would correlate to more like five or six months, so it is an extremely tight inventory conditions. Days on the market. The swiftest ever: 20 days. That's the average from the time that home is listed until a contract is signed and verified, so market is moving very, very swiftly.

However, home sales actually fell in February. Why? Well, if there is not enough inventory, sales simply cannot click along.

So we need more inventory to assure that we can satisfy the buyers in the marketplace. Right now the prevalence of the multiple offer, strong run-up in home prices, which increased by 15% from one year before, so this is implying that we are simply lacking inventory. The buyer is there but not the supply.

As related to the single-family and condominium market, in the early months of the pandemic last year, that is to say April, May, we have seen strong desire for single-family over the condominium, but in recent months we are beginning to see condominium market performance reaching somewhat of a parity to single-family, so people are becoming used to the fact that social distancing may be the common use of the lobbies as well as elevator, that there is a safety measures in place so condominium market beginning to show some parity with the single-family.

The price increases are clearly unsustainable. The 15% increase, this is about three, four, times as fast as the people's income growth and, at some point, this simply cannot continue. We need to assure that we have more supply. Only by having more supply that we can have some tamer home price growth.

When we look at the four major regions, all four regions began to see some slowdown. West region did inch out some gain, but if one looks at the southern region, particularly, with the state of Texas actually experiencing electric outage in the month of February actually held back. So there could be some rebound in sales in the south, but it remains to be seen.

One concerning factor is rising mortgage rates. I think it will continue to increase for the remainder of the year for the simple fact that inflation is beginning to pick up.

Inflation has been very tame throughout last year, but now approaching 2%. It may even reach 3% by year-end, which means that overall long-term interest rates will also be edged higher, so please be mindful of this and relay this to your potential clients.

But the 2021, the housing market is still shaping up to be a very solid market. We just need more inventory to fully satisfy the demand. Thank you.

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