February might well prove to be a month we look back on with nostalgia at economic data, where employment was strong, consumer sentiment was relatively high …
… and home sales peaked, right into a transformation toward an online platform model.
As the data reported Friday (March 20) show, existing home sales (homes that are owned and occupied) in the United States ramped up to a 13-year high in February. That upward trajectory traces its genesis and nadir from the Great Recession, of course, and February’s showing comes right into the teeth of what might arguably be expected to be an even greater recession.
Drilling down into the numbers, the National Association of Realtors said sales of existing single-family homes, townhomes, condos and co-ops were up 7.2 percent year over year to a seasonally adjusted 5.8 million units during February.
The data are important because existing home sales make up 90 percent of total home sales. And in other data points, as noted by Reuters, single family homebuilding and completions of single-family housing were also at multi-year peak levels in February.
Taken all together, and with interest rates at historic lows, the overall premise is that sellers and builders, anticipating demand, brought inventory to the market, and expected (of course) to see higher prices.
Indeed, the median existing home price was up 8 percent from last year to $270,100 in February. Inventory also was relatively tight, at 3.1 months to consume current supply, down from 3.6 months at the same time last year.
We may see a shift, and soon, as the coronavirus pandemic continues. The recent enforcement of social distancing means that actually going out to see (and buy) a house will be harder to do — especially in states such as California and New York, where many non-essential businesses (which would presumably include real estate firms) have shuttered.
At the same time, if individuals and families see the continued impact of joblessness brought on by the coronavirus crisis, homeowners may be forced to sell their homes, to raise cash, or to simply get out from under the weight of a mortgage.
“Since mortgage agreements effectively constrain many homeowners from selling properties at a loss, sellers must delay any planned sale until the economy recovers,” Kwame Donaldson, a senior economist at Moody’s Analytics in West Chester, Pennsylvania told Reuters. “This all translates into a steep decline in existing home sales during recessions.” It may be the case, too, that these same homeowners try to sell sooner rather than later.
After all, even though lenders such as Bank of America have said that borrowers can request mortgage, credit card and other loan deferments, it may be more palatable to offload debt burdens as quickly as possible.
Against that backdrop, we may — eventually — see a sea change in the way homebuying actually is done. It may become — with the aid of platforms — a much more digitized experience.
In one example, as detailed in this space earlier this year, Prevu seeks to shift the process to the buyer, and brings the agent into the process much later on than has been seen traditionally. The platform itself digitally acquires the customers (who get cash back on the purchase), as Prevu Co-Founder Thomas Kutzman told Karen Webster. The platform matches buyers and agents together, properties can be viewed online and offers can be submitted digitally.
All manner of verticals are shifting as buyers and sellers navigate unfamiliar terrain. On the other side of this — when the dust settles — homebuying will be no different.