The first big holiday of the holiday season is behind us. We’ll find out soon if it results in more COVID-19 infections and will be thankful if we all came through it healthy. What we also need to be thankful for is the health of the nation’s real estate market, which is shockingly better than anyone would have thought in March.
National home sales rose to a 14-year high in October, representing the fifth straight monthly increase. Economists credit this phenomenon to both the super low cost of mortgage borrowing and the shift in lifestyle preferences resulting from the pandemic. This is one of the best stretches for the housing market in several years, accelerating what was an already good market before the pandemic.
Mark Zandi, chief economist at Moody’s, commented that “In the pandemic, nothing has been more positively surprising than single-family housing.” He goes on to say, “This is a fundamental shift in housing preferences.” Families and singles are leaving large cities and purchasing single-family homes despite soaring home prices.
According to the National Association of Realtors, existing home sales rose 4.3% in October from September, and 26.6% from October this year compared to October last year. As a comparison, Manatee County single-family home sales increased by 48.4% from last October to this October as reported in last week’s column, almost double the national average.
In addition to a shift in lifestyles because of the pandemic, buyers are aided by mortgage rates now at their lowest level since Freddie Mac began tracking them in 1971. However, low interest rates are being somewhat offset by an increase in home prices and shortage of inventory making it very challenging for first-time buyers to get into the market. This shortage of inventory could worsen in the coming months as COVID-19 cases increase, since some sellers will not place their homes on the market for fear of infection. This is especially true for older homeowners who may be ready to downsize but will not allow buyers or realtors in their homes.
New home construction is also benefiting from the busy real estate market. The S&P Homebuilders Select Industry index is up 24.2% this year. In addition, single-family home rentals are also increasing quickly, with families wanting a way out of crowded areas quickly. Overall, a good real estate market always increases consumer spending in general. Appliances, furniture, landscaping and a variety of decorative and other home goods benefit from people moving from one location to another and purchasing or renting new properties.
Like all new events in our collective lives, the pandemic has produced unique contingencies to real estate contracts and buyers desperate for homes are going for it. Some of the more unusual contingencies I’ve read about include people who want to leave their pets with the house when they either can’t take them to their new location or they just feel it’s better for their pet to remain in familiar surroundings. Surprisingly, some buyers will agree to this especially if they’re pet lovers to begin with. Also, there’s crazy stuff like outdoor decorations and loved one’s ashes that can’t be removed, and home visits to pet graves in the yard the sellers are leaving. Most of these requests can be worked through without becoming part of the actual sales contract but it is just another oddity of what may well become the year none of us will ever forget.
As we look forward to Christmas and try to find a way to navigate through a reduction of festivities, we can at least be encouraged by the flourishing real estate market. But be prepared if the seller you’re negotiating with wants Santa on the front porch as a permanent contingency. Stay safe.
