With a severely limited supply of homes on the market and the lowest mortgage rates in history, house hunters should expect steep competition this spring. The new coronavirus remains a wild card for the housing market, but if the scare is short-lived, buyers are poised to swoop down in droves. “January has already been strong, with prices up, home sales up, and listings down quite a bit,” Daryl Fairweather, Redfin’s chief economist, told USA Today. “So home buyers are more likely to face competition.”
Inventory in January was the lowest it has been in more than two decades. At the end of the month, there were 1.42 million homes for sale, including condos, co-ops, and single-family homes. That is down 10.7% from a year earlier, according to data from the National Association of REALTORS®. However, buyer demand has remained high, which has put pressure on home prices. The median sales price for all housing types was $266,300, up 6.8% from a year ago, NAR’s housing data shows.
Coronavirus fears have rocked the stock market in recent weeks, and that may prompt some aspiring buyers to hold off on a purchase. But the stock market chaos also could make home prices rise. “There might be people looking to diversify into real estate instead of stocks,” Jason Gell, president of the Greater Boston Association of REALTORS®, told USA Today. “That can cut affordability for buyers.”
Lower interest rates could help. The Federal Reserve made an emergency rate cut last week to its short-term rate amid coronavirus concerns. The 10-year Treasury note, which influences mortgage rates, also has plummeted to record lows. The 30-year fixed-rate mortgage last week averaged 3.29%, the lowest on record, Freddie Mac reported. “We’re seeing lots and lots of people at open houses,” Gell says. “Interest rates are still extremely low so that the actual monthly payments are fairly affordable.”
A report released last week by realtor.com® also showed plunging national housing inventory. Twenty-five of the nation’s 50 largest metros saw their inventory decline by 20% or more. The largest drops were in Phoenix, San Diego, and San Jose, Calif., which saw decreases exceed 36% annually.
For buyers heading into the market: “Be patient,” says Jessica Lautz, vice president of demographics and behavioral insights at NAR. “You may have to bid on several properties before you beat out the competition for that home. That local REALTOR® will know how to sweeten the pot for that potential seller and make your offer the most attractive.”