The property for sale sign of a home states that the home is under contract in Washington, DC, Nov. 19, 2020.
Saul Loeb | AFP | Getty Images
Pandemic-driven demand brought total home sales in 2020 to the highest level since 2006.
Yet even the most ardent buyers run into barriers in today’s housing market. Record low supply and record high prices limit the exceptionally high demand.
According to the National Association of Realtors, sales of existing homes rose only 0.7% in December from November to a seasonally adjusted annualized rate of 6.76 million units. Sales were 22% stronger than in December 2019.
As unexpected as a global pandemic was, so was the response from homebuyers. After a sharp decline in March and April, sales suddenly started to increase. Total sales volume at the end of the year ended at 5.64 million units, the highest level since 2006 and much stronger than predicted before the pandemic. Buyers were driven by a desire for larger suburban homes with dedicated spaces for work and education.
“Home sales could potentially reach 8 million if we had more inventory,” said Lawrence Yun, the estate agents’ chief economist. “Mortgage rates should remain very low in 2021, although we may have already seen the lowest.”
Strong demand exacerbated the already low stock of homes for sale at the beginning of the year. At the end of December, the stock was only 1.07 million homes for sale, down 23% year-on-year. At the current sales location this amounts to a stock of 1.9 months. That’s the lowest number of homes since real estate agents started tracking this stat in 1982.
Low supply and strong demand continued to push heat below house prices. The median price of an existing home sold in December was $ 309,800, an increase of 12.9% compared to December 2019 and the highest December average price ever.
Part of the surge in the median price is that home sales are stronger at the top end of the market, where there is more supply. Sales of homes priced under $ 100,000 fell 15% annually in December, while sales of homes priced between $ 500,000 and $ 750,000 were up 65% annually. Home sales of more than a million dollars were 94% higher than a year ago.
Due to fierce competition for homes, more buyers are also making offers with cash.
New buyers made up 31% of sales. They usually make up about 40% historically.
It also took an average of 21 days to sell a house in December.
“It’s unusual, because every year during the holiday season we would see days in the market increase, but not this year,” said Yun.