What. A. Year. 2020 appeared to be the year that homeowners would finally jump back into the market. The first ten weeks saw more homes listed over the previous time period in 2019 and homebuyers were out early buying at a spring market pace in January. On March 5th, 2020, the Federal Home Loan Mortgage Corporation (Freddie Mac), reported the U.S. weekly average 30-yr fixed rate mortgage hit a new all-time low of 3.29% beating the previous record set in November of 2012. This was to be the year that Supply and Demand would balance out and it appeared that this may be headed back towards a balanced real estate market.
Whatever it was called, the World Health Organization (WHO) announced in January of 2020 that there was a mysterious respiratory-related pneumonia originating in China. By February, the CDC said that COVID-19 was heading toward pandemic status and by the 2nd week of March was fully declared as such by the WHO.
And Just Like That, The Real Estate Market Changed
For the next four weeks, home sellers and buyers alike paused as the state and country began to issue stay at home recommendations (or orders as in the case of California). Employers scrambled to move employees from existing office settings and began setting up home offices in order to keep the local business economy going. Schools moved learning online and like businesses, students moved back to their homes to restrict contamination and transfer of the virus.
New rules for Realtors showing homes included limited time frames per showings, discouraging overlapping showings by other agents and homebuyers, sanitization rules such as booties, masks and rubber gloves along with explicit instructions to not physically touch anything inside of homes. Doors, closets and cabinets along with lights would all be left open or on. And the other challenge would soon become having to work showings around homeowners’ schedules since sellers were now working from home. All in all, Realtors, buyers and sellers alike adapted fairly well and real estate was deemed as an essential business in the state’s economy and allowed to continue to operate the entire year.
The Effects of a Covid-19 Pandemic and the Real Estate Economy
- From a Sellers Perspective:
After it became apparent that homebuyers were still going to be active in the local real estate market, even during a pandemic, homeowners had a choice to make. Sit tight and ride this out, make alterations in their homes to accommodate working remotely and home-based learning or make the leap to sell in the effort of finding a larger home. In 2020 the average number of homes added to market each week was 269, down just over 6% from 2019. Based on that data alone, one would expect sales to have been down due to a lower choice of inventory for homebuyers. That assumption was proven very wrong in 2020.
- From a Buyers Perspective:
2020 was the year of the frantic homebuyer. The year was going to be very active as the first two months of the year showed. Even during the four-week pause from mid-March to early April, homebuyers still wanted (shall I say demanded) to be out searching for homes. Applying the same calculations to weekly offers accepted, pending sales averaged 258 homes going under contract each week which is a 25% hike over 2019. It is almost impossible to build home inventory levels when for every 269 homes that entered the market in 2020, 258 had offers on them.
Wasn’t Just Buyer and Seller Activity
- Record Sale Prices and Volume
Mortgage interest rates continued a downward spiral as the U.S. weekly average 30-yr fixed rate mortgage bottomed out at 2.67% as of December 31st, 2020. This allowed home affordability to skyrocket while at the same time a deep seller’s market drove prices upward.
2020 Des Moines residential home sales volume topped the four-billion-dollar mark for the first time and closed upwards of 16,700 sales—a 16.8% increase over 2019.
- Home Appreciation Values
There is so much more to be said about the Des Moines real estate market in 2020, but I’m already pushing my limits on space, so I will end with the subject of home appreciation.
These numbers are focused on the Des Moines metro sales of existing homes only and split between single-family properties and the condo-townhome markets. In both of these categories, the most commonly sold styles of homes were ranch style and two-story style homes with the ranch style most popular overall.
Will 2021 Be a Repeat of 2020 Activity?
All indications are pointing toward another very active year with homebuyers. Mortgage interest rates are likely to rise but not to a point that it will discourage buyers. In fact, it may have the opposite effect as buyers race to find that new home and also lock in on the lowest interest rate. The appreciation rate of most homes very well could be nudge needed to get homeowners to finally enter the market.
If that doesn’t happen, it will be a race for homebuyers to get inside of any new listings and literally make offers on the spot. There have already been reports of newly listed homes with multiple offers, something not commonly experienced in January. The new construction segment is doing their part to build homes as fast as possible but rising material costs and lumber shortages will make it a challenge to keep pricing within reach of a typical first time or move up buyer.
My best advice to current homeowners is to start watching the real estate market now and be ready to jump on that next home if it appears. Be in contact with a reputable local mortgage lender to find out if you are able to possibly buy without selling, and most importantly, when you do enter the for-sale market, price your home properly and put your home in its best condition.