COVID-19 and Housing

It has been a year of sweeping change to the American real estate market. Real estate, like the remainder of the economy, largely ground to a halt in March and April. Record unemployment cast uncertainty onto financial futures across all communities and industries.

Stay-at-home orders and the closure of non-essential businesses across the country interrupted the showing of homes, and though many Americans in high density urban areas were suddenly motivated to move towards lower density communities, logistics and the economy at large were thrown into disarray during what is traditionally real estate’s busiest season of the year.

Sharp declines in sales were felt across the country. Overall, the market experienced an estimated 23% decline in the second quarter, as compared to home sales from the same period in the last 3 years. At the time, most market speculations were grim regarding the remainder of the year.

Despite these dire predictions, the housing market experienced a rebound in the summer and fall. Low interest rates and sweeping changes to American workforce culture incentivized many home buyers. June sales of existing homes were up 20.7% from May, though still down 11.3% from June 2019. In July, gains continued, with existing home sales up 24.7% from June, up 8.7% from July of 2019. All told, the third quarter experienced an estimated 18% increase in home sales.

The rebound has pushed the U.S. housing market to heights unseen since 2006. 30-year fixed mortgage rates have hit numerous record lows. Potential homebuyers are feeling greater buying power. However, this increase in demand has strained the housing supply. 69% of existing homes on the market in August sold in less than a month. Approximately 1/3 of houses on market sold above listing price, the highest level ever recorded.

Density has been an important part of 2020’s real estate story. High density urban areas experienced more drastic losses in the second quarter, and recovery in these same areas has lagged low density communities. New York City’s real estate grief has continued through the summer and into the fall, with grim prospects for the immediate future. Residential real estate sales were reportedly down by 40% in July and 57% in August, according to year-to-year comparisons.

Conversely, less dense urban areas in Texas and Florida experienced a strong summer surge, largely credited to quick and broad adaption of digital real estate services. Housing in the Houston area reported 5 consecutive months of double digit increase in year over year sales, from May through October. In all regions, the COVID-19 death rate has had an impact on listing prices. Communities experiencing higher rates of COVID-19 associated death lower median listing prices than communities with lower COVID-19 death rates.

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