All-time record for home sale prices

The median home sale price increased 16% year-over-year to $331,590 – an all-time high, per a report this week from Redfin. But that’s not stopping buyers from snatching up homes days after they’re listed.

During a four-week period ending March 21 and covering 400 metros, 58% of homes that went under contract had an accepted offer within the first two weeks on the market. And between March 14 and March 21, 61% of homes sold in that timeframe had been on the market two weeks or less, and 48% had sold in one week or less.

And offers are coming in well-above asking price, too. Nearly 40% of homes sold above their list price – another all-time high – and 15 percentage points higher year-over-year. The average sale-to-list price ratio, which measures how close homes are selling to their asking prices, increased to 100.2%.

This is concerning for experts, though, many of whom believe home prices will remain high even after mortgage rates, inventory, and building material costs recover to pre-pandemic levels. Rates are already above 3% – after falling into the 2% range during the majority of 2020 – but construction companies are still struggling to keep up with insane lumber prices, stifling new builds.

National Association of Home Builders Chairman Chuck Fowke recently noted that supply shortages and high demand have caused lumber prices to jump “about 200%” since April 2020, and the elevated price of lumber is adding approximately $24,000 to the price of a new home.

When the pandemic is over, purchasing a home is going to cost much more than ever before, putting homeownership much further out of reach for many Americans,” said Daryl Fairweather, Redfin chief economist. “That means a future in which most Americans will not have the opportunity to build wealth through home equity, which will worsen inequality in our society.”

Fairweather noted that President Joseph Biden’s hopeful $3 trillion infrastructure plan includes building 1.5 million sustainable homes, but there is no guarantee the bill will be “passed with every policy proposal intact.”

“America needs an audacious goal to increase the housing supply, given the U.S. is short 2.5 million homes,” she said. “It may be expensive to build millions of homes, but ignoring the problem would only cause housing to become more unaffordable and worsen housing insecurity.”

The best chance at home prices lowering is the continued rollout of the COVID-19 vaccine, experts said, which will allow lumber mills to reopen and material prices to lower. Builders will then be spending less on new builds, which will help the backlogging of inventory.

~Housing Wire

Rates sharply higher; homebuyer competition fiercer than ever

• Mortgage rates bounced higher again this week, making homebuying even more expensive at the start of the all-important spring market.
• With home prices skyrocketing, any rise in rates knocks even more potential buyers out of the running, and yet somehow the housing market is more competitive than ever.

Mortgage rates bounced higher again this week, making homebuying even more expensive at the start of the all-important spring market.

With home prices skyrocketing, any rise in rates knocks even more potential buyers out of the running, and yet somehow the housing market is more competitive than ever.

The average rate on the 30-year fixed mortgage hit its last low of 2.75% at the end of January, and has since climbed pretty steadily, according to Mortgage News Daily. After a sizeable move overnight, it now stands at 3.45%.

“Since the beginning of February, the total damage is nearly 3/4ths of a percent, making it one of the biggest moves in any 6 weeks, ever,” said Matthew Graham, chief operating officer at Mortgage News Daily.

“The purchase market always weathers these storms, and the ultra-tight supply situation coupled with still-ravenous demand in many metro areas may keep the housing market surprisingly buoyant. The bigger question is when rising rates will ultimately impact prices.”

The rate is the same now as it was a year ago. The difference from a year ago, however, is that home prices are soaring.

Prices are now up over 10% from this time in 2020, according to CoreLogic, and there appears to be no letup in the gains. This is due to the record low supply of homes for sale. 

Homebuilders are not stepping up as much as hoped, because they are facing higher costs for land, labor and materials. They also continue to experience delays in getting materials to job sites, due to Covid. Single-family housing starts came in much lower than expected in February, and the backlog of unbuilt homes is rising.

“There has been a 36% gain over the last 12 month of single-family homes permitted but not started as some projects have paused due to cost and availability of materials,” said Robert Dietz, chief economist of the National Association of Home Builders.

“Single-family home building is forecasted to expand in 2021, but at a slower rate as housing affordability is challenged by higher mortgage rates and rising construction costs.”

New homes already come at a price premium to existing homes, so rates are particularly important to that market.

For a new home with an estimated median price of $346,757 in 2021 and the recent 30-year fixed-rate mortgage rate of 3%, a quarter percentage point increase in the interest rate would price out approximately 1.3 million households, according to a new calculation by the NAHB. 

The supply crunch of existing homes is only exacerbated by higher mortgage rates. Homeowners who sell would likely have to buy their next home at a higher interest rate, so that’s a significant deterrent to moving.

The number of newly listed homes for sale for the week ended March 13 was 24% lower year over year, according to realtor.com. The total number of homes for sale is now half of what it was a year ago.

While this situation makes it harder for buyers, it also shows that buyer demand has not fallen off much, even in today’s higher rate environment. If buyers had fallen back, the supply would be rising.

Buyers are in fact, “flooding the housing market early this year, eager to find a home of their own,” according to Danielle Hale, realtor.com’s chief economist. On average, homes are selling seven days faster than last year.

Housing demand was pulled forward last year. The pandemic created an emotional need to nest, not to mention a practical need for more space, given the work- and school-from-home environment. Even as vaccinations rise and more people go back to offices and schools, homebuyers are still not only out in force but are increasingly competitive.

Just over a third of homes sold in February went for more than their original asking price. That is the largest share on record, according to Redfin, a real estate brokerage.

Diana Olick, CNBC

Despite snowstorms, Puget Sound housing markets stayed strong

February saw one of the snowiest days on record in the Seattle area, with people in some areas waking up during Valentine’s Day weekend to nearly a foot outside their windows.

But, even with the weather, the Puget Sound region housing market didn’t let up, according to the February report from Northwest Multiple Listing Service.

“It’s amazing how close the February numbers are when compared to February 2020, which was, of course, right before our world changed,” said Mike Grady, president and CEO of Coldwell Banker Bain. “Despite our similarly lousy February weather, the data shows that the market continues to be hot, with residential inventory very tight and median prices rising by double digits across most of our counties.”

In King County in February, there were 2,893 new listings added to the market, slightly lower than in February of last year. Total active inventory in the county was down nearly 18% year-over-year, reflecting the limited inventory that has marked the region’s housing market over the past year.

For residential listings, total active inventory was down nearly 41% compared to the same time last year. The total number of active listings for condos, however, was up more than 50% compared to February of 2020.

Pending sales overall were down slightly year over year, but were up compared to last month, the report found.

“This tells me that neither the snowstorm that hit the region nor the jump in mortgage rates deterred buyers who were still out in force last month,” Windermere Chief Economist Matthew Gardner said.

Gardner added even though pending condo sales also decreased compared to the same time last year, several neighborhoods in Seattle, including Queen Anne, downtown Seattle and Ballard, “performed better than expected.”

“That suggests to me that there may not be the mass exodus from the core urban areas that many have been predicting,” Gardner said.

Closed sales in King County were up about 13.5% compared to the same time last year, with 2,146 closed sales over the course of the month. Home prices were also up more than 10% year over year, with the median price for closed sales in February coming in at $679,075.

Prices were also up from last month, when the median closed sale price was $644,950. Among residential homes, prices rose even more steeply in February, up more than 11% year over year. For condos, prices rose only about 1% compared to the same time last year.

“Like last year, before we knew what was just around the corner, buyer demand is high. There continues to be opportunities for buyers seeking condos, and median prices are more stable, so that’s also good news for buyers,” Northwest MLS Director John Deely, executive vice president of operations at Coldwell Banker Bain, said.

For buyers looking for residential homes, though, they face a more difficult market.

“Our brokers are working hard to help prepare buyers both emotionally and financially for the realities they face, and to help position them as the winning purchaser,” he said.

“With things opening up, and open house restrictions eased to allow more people at one time, brokers are also spending a good amount of time preparing their sellers to get comfortable with having people in their homes and to safely facilitate viewings, as well as managing and analyzing all the offers.”

Moving forward, brokers said they were optimistic more homes would be added to the market and the region’s housing market would stay strong.

“After an intense winter in the local real estate market, more new resale listings are on the horizon this month. March historically marks the beginning of the eight month prime-time real estate market,” said J. Lennox Scott, Chairman and CEO of John L. Scott Real Estate. “The intensity we’re seeing in the market should come down slightly as more available homes enter the market, but we have to play catch up with pent-up buyer demand first.”

~Becca Savransky, Seattle P-I