National Association of Realtors Chief Economist and Senior Vice President Lawrence Yun, Ph.D., told a virtual audience of Southwestern Illinois Realtors and fellow business professionals that housing is one of the few markets to remain vibrant during the pandemic.
Yun, who has been forecasting for the NAR for a decade, said the coronavirus has taken its toll on many industries, but not on residential real estate.
“The housing market is rolling along very nicely,” said Yun. “It’s one of the very few sectors that is doing really well during this pandemic period.”
Record low mortgage rates, a surge in personal income growth and the working-from-home trend since March are factors driving home sales regionally and nationally, according to Yun.
Existing-home sales grew for the fourth consecutive month in September to a seasonally adjusted annual rate of 6.54 million, according to the NAR. This is up 9.4 percent from August and up nearly 21 percent from one year ago, Yun said. More than 7 in 10 homes sold in September were on the market for less than one month.
“Our one constraining factor is lack of inventory,” said Yun. “Multiple offers mean one winner and multiple losers who must begin the home-buying search process all over again with their realtors. We need more inventory, nationally and here in the Southwestern Illinois region, so people can make a measured decision.”
NAR data reveal that total existing-home inventory nationwide hit a record low of just 2.7 months’ supply in September, corresponding to a 14-year peak in existing-home sales that month.
Other factors driving the continued surge in existing-home sales, according to Yun, include a trend of buying homes in the suburbs and a move away from city centers. “People are moving to the suburbs because they’re seeking safer neighborhoods and because the work-from-home trend doesn’t require many of them to commute,” he said. “The location of schools – rather that the location of offices – is now driving many home-buying decisions.”
A recent NAR survey regarding the locations of homes in which clients are now looking to purchase cited that 46 percent are searching for a home in suburbs/subdivisions, 39 percent are looking to buy in a rural area, 25 percent in a small town, 14 percent in an urban area/central city and 13 percent in a resort community/recreation area.
“Work styles – working from home completely and a hybrid model of working from home part of the time while commuting part of the time – are definitely impacting home-buying decisions,” Yun said, in his presentation on Nov. 4.
Counties that cater to vacation homes represent a market that is performing better than in areas where solely work-from-home properties are being sold, according to NAR data. Existing-home sales in “vacation counties” are up more than 20 percent over non-recreational destination counties nationwide.
In 2021, Yun predicts home prices will increase 2 percent to 3 percent and home sales will rise 6 percent to 10 percent.
“We’ll experience a ‘second order of housing demand,’ wherein people who would have never considered selling their home pre-pandemic but now want an extra bedroom for a permanent home office,” Yun said. “This second order of demand will begin to appear in 2021 and beyond.”
Kyle Anderson, CEO of the Greater Gateway Association of Realtors, said Yun’s forecasting is atop the list of valued resources that equip the association’s 1,200-plus realtor members with the market intelligence they need to serve clients throughout its seven-county service area.
“Dr. Yun’s insights into the trends of housing consumer’s choices provides invaluable information to our members,” stated Anderson. “They will be able to help better market their listings and position their buyers in the best possible way within the market.”
Desirée Bennyhoff, president and CEO of the Edwardsville/Glen Carbon Chamber of Commerce – a business advocacy organization serving hundreds of businesses across the region – said Yun’s Nov. 4th forecast is indicative of what’s transpiring across Edwardsville and Glen Carbon in terms of scarce home inventory.
“Dr. Yun’s insights reinforced the chamber’s position that a competitive tax environment and reasonable fee structures are key to continued residential growth,” Bennyhoff added. “Maintaining strong residential and commercial real estate markets is always critical to communities’ success – and with the uncertain economic situation in which we find ourselves, now more than ever.”