Family moving into new home

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Unleashing the Economy

The pent-up demand for homes should be a boon for markets.

July - August

We’re on the upswing. In April, pending sales contracts hit their all-time lowest level during the most restrictive phase of the stay-at-home orders. Consequently, closing activity reached its bottom the following month in May. The homes that were listed then drew plenty of buyer interest. Home prices have been rising at more than a 5% annualized clip.

Keep in mind that the housing market was exceptionally strong prior to the pandemic and before the massive job losses began. In the first quarter, when the gross domestic product contracted by 4.8%, the residential investment component comprising economic activity from home sales, home construction, and remodeling activity grew by 21%. Consumer spending and business spending, by comparison, had contracted 8% and 9%, respectively.

Another noteworthy data point was the strong growth in the savings rate. Social distancing meant no trips to the shopping mall, no eating in restaurants, no vacation travel, no baseball games. With the reopening of the economy and the trajectory of new cases of COVID-19 generally falling in the spring, consumers were ready to unleash much of those savings back into the economy. Government relief programs had implementation challenges but eventually provided generous levels of aid.

New listings and new-home construction are urgently needed. Home buyers want to lock in record-low mortgage rates. They know that in five years or so, consumer prices could accelerate as a result of the government’s massive “printing” of money. Higher prices for food, tuition, health care, rents, and real estate are inevitable. The only major expenses holding steady are fixed-rate mortgage payments. And those will feel even more manageable as incomes grow.

Home sales nationally are forecast to be down only 11% in 2020, while prices should rise by 4%. In 2021, everything lights up as sales are expected to jump 15% while price growth stays in the 4% to 6% range. The demand will be there; the real question is whether the houses will be.

Getting Past the Trough

It’s been a rough few months, but property sales are moving in a better direction. As of May 17, new contracts were down 20% on a year-over-year basis, from a steep decline of nearly 40% in the last week of April. See the latest housing data from NAR.

Supply & Demand, June 2020

© National Association of REALTORS®


Lawrence Yun
Chief Economist and Senior Vice President of Research at the National Association of REALTORS®

Yun oversees and is responsible for a wide range of research activity for the association including NAR’s Existing Home Sales statistics, Affordability Index, and Home Buyers and Sellers Profile Report. He regularly provides commentary on real estate market trends for its 1.3 million REALTOR® members.

Dr. Yun creates NAR’s forecasts and participates in many economic forecasting panels, among them the Blue Chip Council and the Wall Street Journal Forecasting Survey. He also participates in the Industrial Economists Discussion Group at the Joint Center for Housing Studies of Harvard University. He appears regularly on financial news outlets, is a frequent speaker at real estate conferences throughout the United States, and has testified before Congress. Dr. Yun has appeared as a guest on CSPAN’s Washington Journal and is a regular guest columnist on the Forbes website and The Hill, an “inside the beltway” publication on public affairs.

Dr. Yun received his undergraduate degree from Purdue University and earned his Ph.D. from the University of Maryland at College Park.