This time last month there were a few early signs of hope that real estate had adapted to social distancing requirements when home showings stopped their downward trajectory and slowly began to inch upward. That initial turnaround has made huge strides with many states seeing sudden and sharp upswings in how many showings have been booked. According to data from ShowingTime, tens of thousands of showings that took place were all virtual tours with the prospective buyers observing via video while an agent or someone in the home toured the house. (ShowingTime is a national home showing booking service that manages approximately 5 million showings per month and their data correlates strongly to home purchases 60 to 90 days in the future).
Another sign of strong demand is the increase in bidding wars. Redfin
releases data about homes their agents wrote offers on and found that from late April to early May 41% of the homes their agents worked with received multiple offers. Compared to April of last year, only 15% of homes Redfin agents worked with received multiple offers. Even more striking is the anecdotal evidence of how many bidders there were for some homes:
Seattle Redfin agent David Hokenson said in the release, “One of my clients made an offer for a home listed at $360,000 in the Renton Highlands, a neighborhood in a Seattle suburb. Even though the home was outdated and hadn’t been renovated since the 1960s, it was one of 24 total offers. That home ended up selling for well above asking price.”
In Los Angeles, luxury agent Sally Forster Jones from Compass, had two clients bid on properties–one asking about $800,000 and the other under $1.5 million–only to lose out in a crowd of over 30 offers for each home.
These two indicators are backed up by the continued increase in both the number of mortgage applications and the amount of money buyers wish to borrow.
“Purchase applications increased 9 percent last week – the sixth consecutive weekly increase and a jump of 54 percent since early April,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Additionally, the purchase loan amount has increased steadily in recent weeks and is now at its highest level since mid-March.”
To get a sense of the demand, here’s a look at the leading indicator of home showings around the country.
Looking at Florida, often a harbinger of how bad things could get, we see the showings have returned to last year’s levels in just the past few days.
And for one of the hardest hit states, New York, the rise was not as steep but still very much on a growth trajectory.
California, which started early with lockdown orders, saw a longer plateau than New York but a swifter return to normal.
If you want to look up the data for an individual state, go to this ShowingTime link with an interactive map of the country.
Home sales are going to be solid enough for the next quarter, but it is the second half of the year, when stimulus payments run out and longer term unemployment realities set in, that we all need to be wary of. The rental market is what will face the toughest test. Of the tens of millions who applied for unemployment, many of them were in lower income jobs so they were unlikely to be a potential homebuyer this year anyway. If the rental market really plummets I anticipate many of the landlords who can’t find tenants will choose to put their rental properties on the market given the demand is so high from buyers. Some markets will see a big enough increase in supply to bring down prices, but still I doubt the impact will be dire. Demand was so strong before Covid-19 hit that it will keep prices up and carry through to the end of the normal buying season.