Flight from the Cities: Existing Home Sales Soar Nearly 21%—A Record Shattering Monthly Jump
Existing-home sales exploded higher in June as home buyers took advantage of record-low mortgage rates and fled city centers beset with anti-police protests, riots, looting, crime, shootings, stay-at-home orders, shuttered businesses, closed schools, and a loss of amenities such as restaurants, theaters, and museums.
Total existing-home sales rose 20.7 percent from May to a seasonally adjusted annual rate of 4.72 million, the largest monthly increase ever, data from the National Association of Realtor showed Wednesday. Sales fell in each of the previous three months due to the ongoing pandemic and lockdown rules that made showing homes in person difficult and sometimes impossible.
Each of the four major regions achieved month-over-month growth, with the West experiencing the greatest sales recovery.
“The sales recovery is strong, as buyers were eager to purchase homes and properties that they had been eyeing during the shutdown,” said Lawrence Yun, NAR’s chief economist. “This revitalization looks to be sustainable for many months ahead as long as mortgage rates remain low and job gains continue.”
The shutdown may have led to some pent up demand, leading sales higher. In addition, many city-dwellers now see suburban life more attractive because so many cities have shutdown restaurants, bars, theaters, museums, and other cultural and commercial amenities that made urban life desirable. Parents are also seeking out school districts where schools may open full-time rather than continue the virtual learning that marked the end of the last school year and seems likely for many city schools this fall.
The stay-at-home orders also highlighted the confining features of apartment life. A house with a yard and more square feet is all the more valuable for families forced out of public spaces. What’s more, the riots, looting, a rise in shootings, and anti-police protests have brought renewed attention to crime and other dangers of city life.
Working from home is likely also causing many buyers to consider living outside of cities. Suburban homes have more room for home offices and commuting is less of an inconvenience when workers are going into office less frequently or staying home most of the time.
“Home buyers considering a move to the suburbs is a growing possibility after a decade of urban downtown revival,” Yun said. “Greater work-from-home options and flexibility will likely remain beyond the virus and any forthcoming vaccine.”
Despite the record high jump in the month-to-month figure, sales were down 11.3 percent from a year ago. Some of that annual decline is likely due to low inventory. Compared with a year ago, the total number of existing homes on the market was down 18.2 percent. Inventory rose just 1.3 percent from May.
According to NAR’s Yun, low inventory was a problem even before the pandemic and may be inflating home costs.
“Home prices rose during the lockdown and could rise even further due to heavy buyer competition and a significant shortage of supply,” Yun said.
Homes are selling rapidly. Properties typically remained on the market for just 24 days in June, seasonally down from 26 days in May, and down from 27 days in June 2019. Sixty-two percent of homes sold in June 2020 were on the market for less than a month.
Higher prices and tight inventory discouraged individual investors and second-home purchasers from purchasing homes in June. These fell to 9 percent of buyers in June, down from 14 percent in May and 10 percent a year ago.
First-time buyers made up 35 percent of sales in June, up from 34 percent in May 2020 and about equal to 35 percent in June 2019.
According to Freddie Mac, the average rate for a 30-year, conventional, fixed-rate mortgage fell to 3.16 percent in June, down from 3.23% in May and far below the 3.94 percent average rate for 2019.
Single-family home sales sat at a seasonally-adjusted annual rate of 4.28 million in June, up 19.9 percent compared with May, and down 9.9 percent from a year ago. The median existing single-family home price was $298,600 in June, up 3.5 percent from June 2019.
June 2020 existing-home sales in the Northeast rose 4.3 percent. Midwest sales jumped 11.1 percent. The South recorded a 26.0 percent rise. Sales in the West soared 31.9 percent.
Home prices were up on an annual basis in all four regions. Sales volume were down compared to a year ago.