2020 Q3 Real Estate OverviewPosted on Oct 27, 2020
We’re currently living through some unprecedented times as far as the housing market and global economy are concerned. The coronavirus pandemic has changed pretty much everything about the way people work, recreate, and even purchase real estate.
With no real comparison for historical trends — and no way to predict what the future looks like as the weather cools — forecasting the final quarter of 2020 is trickier than ever. We do, however, have a few clues from the Q3 that allow us to make a few informed predictions about the national and Colorado markets as we head into Q4…
Buyer Demand Will Remain Heavy
When states started shutting down back in March, home sales nearly ground to a halt. But subsequent months showed us that was a temporary reaction as buyers and sellers got established the new normal in the real estate market.
Over the summer, pent-up buyer demand was unleashed as June, July and August saw record-breaking home sales nationally compared to last year.
According to the National Association of Realtors, what we are witnessing is a true V-shaped sales recovery. In fact, July saw a 24% increase in home sales from June, and an 8.7% year-over-year increase.
In “normal” years, more real estate transactions take place in the spring and summer (Q1/Q2) than during the fall and winter (Q3 & Q4) so it remains likely that we’ll still see some decline in sales volume as we head into the fourth quarter. However, experts say the number of sales should stay relatively high compared with other years, assuming we don’t undergo another COVID-induced economic lockdown.
2. Prices Are Likely to Remain High (But Why That Might Not Matter)
The real estate market has remained a relative bright spot amid concerns over the pandemic, upcoming election, and a generally bleak national economic picture. Prices across the United States continued to climb in August, rising at an annualized 8.6% from the prior month, the second-highest month-over-month rate of 2020, according to the latest market stats from the Denver Metro Association of Realtors.
This could possibly be because those that were most affected by the pandemic-induced downturn were likely to be hourly workers in service industries, who also tend to be renters, rather than homeowners.
When it comes to purchasing, it is still a seller’s market overall. With fewer homes on the market than usual, there’s more competition over each listing. Home inventory (active listings) is down about 20% from a year ago, and that’s driving prices up. The national median home rose to $307,000 as of July, according to the National Association of Realtors (an 8.5% increase year-over-year).
That means as a potential home shopper, you should be ready for a bidding war when you find a home you want.
However, buyers today may be able to pay a little more for a home than they would have a few years ago. While home prices are already at an all-time high, monthly mortgage payments are lower, because of historically low mortgage rates.
According to the October market statistics from the Denver Metro Association of Realtors, buyer demand in the Denver-metro area is following suit to the national picture. Low interest rates, combined with local demographics and increasing wages continue to ignite buyer demand despite a historic lack of inventory, with just 3,041 detached single-family homes available for sale in the 11-county metro at the end of the month. This shattered the previous record low of 5,693 for the month of September. Months of inventory hit an all-time low at 0.91 months (breaking the previous record low from August 2020 at 0.92 months).
The homes that are available have been flying off the market, and fast. Single-family detached homes spent a median of just six days active in the MLS, which represented a three-day decrease from the previous low. Closed and pending transactions for both attached and detached properties saw new records. The median home price for both single-family and condo homes hit record-breaking highs (respectively) at $510,000 and $334,752. Total sales volume of $3.15 billion represents the highest amount for any September on record and the third-highest month of all time. Mortgage purchase applications continued a 20-week streak of year-over-year increases, up 22% from 2019. In short, September in the Denver Metro resulted in the most-difficult buyer’s market on record in recent history.
These records, along with various other contributing factors, set the tone for why metro Denver is such a competitive market. The end of the third quarter was solidly up, positioning us for one of best autumns, and possibly winters, we’ve seen in quite some time. All things considered, the remainder of this fall is likely to see average or above-average home sales, as opposed to the significant dip that we observed in the spring.
Have more questions or want to chat about what’s happening in your particular area’s market as we head into the end of this year? We’d love to walk you through the numbers!