2020 started off strong with a fairly mild winter. That meant the real estate market was going to come early and by all indications, it would be coming on strong. The last couple of years saw a slight rise in the daily number of homes for sale. Early buyers were out and searching, buying homes new to the market within a week on average of being listed. The stage was set. January and February were good months with sale prices 3½% higher than the same period a year ago and the number of homes for sale was up 1½%.
A New Word: Coronavirus
Around the first of March there was increasing talk about a virus originating in China. The official name was the Covid-19. ‘CO’—Corona, ‘VI’—Virus, ‘D’—Disease and ‘19’—2019, the year first identified. Whether it is referred to as coronavirus or COVID-19, nobody could predict what was going to happen next.
Real Estate Industry Deemed As An Essential Service
By mid-March, Governor Kim Reynolds instituted Iowa’s version of a shutdown, closing restaurants, bars, movie theaters—virtually any venue where public gatherings occur. However, the Governor stopped short of a complete state-wide stay at home order. Real estate was deemed an essential service and that allowed home buyers to complete existing purchase contracts and continue to search for homes. The economic impact of the real estate industry in Iowa accounts for 14.5% of the state gross product pumping $57,900 into the Iowa economy every time a home is sold.†
Record high and lows
As the state went into a modified shutdown, the spring real estate market was exploding. With momentum fueled by hungry buyers with cheaper mortgage money, home sellers were just starting to enter the market. The only dip our market experienced was from March 15th–April 15th. Sellers were the first to pull back by cancelling open houses. At the height of the virus fears, the weekend of April 11th recorded the lowest number of open houses with only 100 homes open that weekend. Of those 100, only 12 were existing resale properties. The remaining 88 were new construction. A normal weekend would have 450–500 homes open.
Cause And Effect
2020 started off strong. Pending sales so far have never been below 2019 levels and is currently up 46% year-over-year. Combining the low inventory of homes for sale with interest rates at 3% and lower for 30-year fixed rate mortgages, home buyers braved the elements—masks, gloves and all, and have bought at a pace faster than homes could be added to the market this year. At the end of June, there were only 2,832 homes for sale in the MLS vs 3,822 June 30th of 2019, a 25% decrease of homes normally for sale.
With less than 1.5 months of inventory on June 30th, the number of closed sales were 369 ahead of 2019. The sale price of these homes also increased 5% year-over-year, primarily due to the ability of buyers able to afford more with low mortgage rates.
In the past 15 years, I have never seen a lower number of homes for sale or a higher number of pending sales. Prior to 2020, the previous low home inventory count was just under 2,900 homes for sale in 2017. So far this year, that low had dropped to 2,750. Recently, the highest number of pending sales in process of closing was 3,200 in 2016. As of June 30th, there were 3,600 home sales pending. The highest recorded closed sale count was 14,603 homes in 2017. At the pace for 2020, we are on target to exceed that number by years end.
If 2020 has proved one thing, it is predictions are difficult to make. It’s a presidential election year. We are in the midst of a global pandemic with the worst potentially yet to come. Home mortgage interest rates may not have hit bottom and home sellers are torn between selling and finding a new home or staying put and riding out the storm. Home buyers are ready, willing and able as are Realtors. The second half of 2020 is going to be an interesting ride!
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† Source: National Association of REALTORS®, The Economic Impact of A Typical Home Sale