It’s an understatement to say that 2020 has been an unusual year. The coronavirus pandemic has left a mark on small and large businesses alike, and no industry is safe from the fiscal rollercoaster, including the real estate market. While sales plummeted in April, the market bounced back in the fall. That said, we’re entering the holiday season, and that presents challenges to homebuyers and sellers alike even in a normal year. While 2020 will be no exception, you can expect a few more hurdles to overcome before year’s end.
Buying and selling during the holidays can already be tricky, and it won’t be any easier in 2020
November and December have traditionally been two of the slowest months of the year when it comes to home sales. Kids are settled into school routines and the weather can be questionable — plus, at least in years past, schedules were packed with holiday festivities. On top of that, money for down payments may be redirected toward holiday spending, with consumers planning to spend almost $1,000 on gifts and other holiday items this year, according to the National Retail Federation (NRF). (Make sure to calculate how much of an impact a lower down payment would make on your monthly payments if you plan to dip into your down payment funds this holiday season.)
And, of course, 2020 continues to offer its own unique challenges.
COVID-19 cases are still on the rise
COVID-19 cases are spiking again, leading to stay-at-home orders and curfews in states like California and Ohio. And in terms of the real estate sector, interest in open houses dropped 50% in early November 2020 compared to the same time in 2019, according to the National Association of Realtors (NAR). Realtors and homebuyers have adjusted to the new reality by taking advantage of virtual tours, but for many, seeing a home is still an important step in the homebuying process.
If you’re selling a home, holding an open house may not be feasible. Your agent may post virtual tours and show your house to interested buyers on a one-on-one basis. But this means they may be spread a bit thin, so expect limited availability from your agent, whether you’re buying or selling.
Fewer houses on the market equals high demand — and high prices
The inventory of homes for sale has also taken a dive — though this trend has been ongoing since June 2019, so it’s not entirely due to the pandemic. Still, the pandemic certainly hasn’t helped, with inventory falling to an all-time low of 2.5 months of supply at the end of October, according to NAR. Inventory is especially low for starter homes priced below $250,000, in particular.
Lower inventory means higher demand, which in turn means higher home prices — according to NAR, the median existing home sales price is at an all-time high of $313,000.
However, mortgage rates remain at historic lows
The good news is that mortgage rates are still at historic lows. The trend started early in the pandemic, with rates dropping to 3.29% in March. As of the week ending Nov. 13, mortgage rates averaged 2.84%, having held below 3% since the end of July, according to the NAR.
Those low mortgage rates help offset the higher home prices, and prospective homebuyers are taking note. Even though the number of mortgage applications declined in late October and early November of this year, the overall number of applications is up 15.8% from last year. Homes are also selling within 21 days, which is the lowest record since the NAR started tracking this data in 2011.
So if you’re considering listing or buying a home this holiday season, it’s not all bad news. Homes are moving quickly due to low mortgage rates, and there’s a good chance you’ll receive an offer near or above your asking price, given the limited inventory. While you need to be ready for your agent to film a virtual tour and follow your state’s guidelines for pandemic safety, you may end the holiday season with an offer (or two) in hand.