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Demand Propels Home Prices Upward

According to a new report by Redfin, 51% of homes sold for more than their list price—up from 26% the same period a year earlier, marking a new record for this metric.

Last year at this time, pandemic stay-at-home orders halted homebuying and selling, which makes year-over-year comparisons unreliable for select housing metrics, according to Redfin. This report was broken into two sections: metrics that are okay to compare to the same period in 2020, and metrics for which it makes more sense to compare to the same period in 2019.

For metrics to compare to 2020:

  • A record-high median home sale price of $354,250, and sales were up 24% year-over-year, also a record.
  • Asking prices reached a median $361,875, also a record high.
  • A record-high 101.9% average sale-to-list price ratio, which measures how close homes are selling to their asking prices, up 3.4 percentage points year-over-year. This means that the average home sold for 1.9% more than its asking price.
  • A record low of 17 days on market for homes that sold during the period, down from 36 days from the same period in 2020.
  • The share of homes sold in one or two weeks are both just shy of their record high level, which was set during the four-week period ending May 9.
  • 57% of homes that went under contract had an accepted offer within the first two weeks on the market.
  • 44% of homes that went under contract had an accepted offer within one week of hitting the market.

Compared to 2019’s totals:

  • Pending home sales were up 19% from the same period in 2019, but are down 3% from the four-week period ending May 9.
  • New listings of homes for sale were down 8% from the same period in 2019, and are down slightly from the 2021 high, which was set during the four-week period ending May 2.
  • Active listings (the number of homes listed for sale at any point during the period) fell 49% from the same period in 2019.
  • For the week ending May 21, mortgage purchase applications increased 2% week-over-week (seasonally adjusted). For the week ending May 27, 30-year mortgage rates fell slightly to 2.95%.

Increases in home prices seems to be keeping may potential homebuyers on the sidelines, as they await prices to drop before dipping into the ever-restricted supply of available homes.

The National Association of Realtors (NAR) reported in its latest Pending Home Sales Index (PHSI) that pending home sales took a step back in April, dropping over March’s total, due in part to the record low inventory of homes available in Q1. NAR’s PHSI fell 4.4% to 106.2 in April, while year-over-year, signings jumped 51.7% as last year's pandemic-related shutdowns slumped sales to an all-time low.

While the lure of sub-3% rates may goad many into a market where homes are selling for record highs, factors such as a depleted skilled workforce and the rising costs of materials are factoring into these price hikes. The National Association of Home Builders (NAHB) has reported that the price of lumber has tripled over the past year, forcing the price of a new single-family home to rise $35,872 on average.

"We are seeing a typical late-spring slowdown in new listings and pending sales," said Redfin Chief Economist Daryl Fairweather. "However, prices don't typically peak until late August, and their growth remains completely unhinged. The fact that homes keep selling for more and more above asking prices goes to show that many more people want a home than there are homes for sale. I don't see that changing until mortgage rates increase, which will likely happen later this year. But until then, the housing market will remain red-hot."

 

About Author: Eric C. Peck

Eric C. Peck has 20-plus years’ experience covering the mortgage industry, he most recently served as Editor-in-Chief for The Mortgage Press and National Mortgage Professional Magazine. Peck graduated from the New York Institute of Technology where he received his B.A. in Communication Arts/Media. After graduating, he began his professional career with Videography Magazine before landing in the mortgage space. Peck has edited three published books and has served as Copy Editor for Entrepreneur.com.
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