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Why Home Sales Are Humming

Even in a pandemic, buyer demand is high. Be sure to keep access fair.

September - October

Home prices have mostly outpaced broader consumer price inflation over the past decade. From 2010 to mid-2020, the median home price rose 61%, to reach $295,300. The key reason: steadily shrinking supply coupled with steadily rising demand. Americans saw Inflation of 18% and a wage hike of 30% over the same 10-year period. Yet incredibly, the percentage of income devoted to a mortgage principal and interest payment to buy a median priced home is essentially unchanged, reflecting the awesome power of low mortgage rates, which hit an all-time low in July and may fall even further.

More amazingly, in the midst of a pandemic and high unemployment, home prices are setting new highs, with multiple offers common on many properties. The rate of home sales, after plunging during the spring shutdowns, is poised to surpass 2019 levels in the final months of the year. That’s due to the Federal Reserve’s maximum liquidity policy, which will assure mortgage rates stay extremely low for a while, dropping as low as 2.7% for a 30-year fixed-rate loan.

Could there be a downside to these rock--bottom rates? While it’s not something to worry about until 2022 or beyond, some homeowners will stay put longer than they might have as they’re disinclined to trade their low rates for a higher one in a new place.

When rates do go up, however, it likely won’t deter those who want a different home. Amid today’s brisk sales, we’re noticing a broad consumer trend: the desire for a larger home in the suburbs or further out in more affordable, smaller towns. Even after the pandemic is behind us, it’s likely that many workers will continue to work from home. So the exodus from cities will lead to a demand for houses that can accommodate a home office (or two).

In your dealings with clients on the move, it’s important to remember your obligation to uphold the Fair Housing Act. The commitment to providing equal professional service to all is not only the right thing to do, it is the law and a requirement of the Code of Ethics. Fair housing is your business.

Low Rates Aren't Going Away Anytime Soon

Mortgage rates are expected to remain very low as the Federal Reserve aims to spur the economy and bring back lost jobs. That’ll keep buyer demand strong, even as inventory woes remain.

Low Rates Graph

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.