Home prices shot up 14.4 percent year over year to $333,900 during September, the largest annual increase in sales price since at least 2012 when Redfin began tracking the data, according to a report Monday from Redfin.
Home sales were also up by 17.6 percent from the previous year on a seasonally adjusted basis, another record-breaking metric since Redfin began tracking the data. Likewise, homes sold in September went under contract in 29 days, the fastest pace on record, and 12 days fewer than the previous year.
Amid record-low mortgage rates, widespread low inventory and a pandemic-fueled frenzy for homes over the past few months, the real estate market has remained resilient during a time of crisis.
“2020 will be known for a lot of things and a record-breaking year for real estate will certainly be one of its more unexpected legacies,” Redfin Chief Economist Daryl Fairweather said in the report. “Demand typically abates in late summer and early fall, but seasonal patterns don’t stand a chance against the other factors motivating homebuyers this year. Homebuyers are seeking spacious homes in areas outside big cities to accommodate homeschooling and remote work. That plus low mortgage rates and record-low inventory are fueling historically high price growth and the fastest market in recent history.”
All of the 87 largest metro areas Redfin tracks saw an annual increase in median prices. Areas that experienced the most significant year-over-year increase included Bridgeport, Connecticut (up 33.1 percent); Memphis, Tennessee (up 29.7 percent); and Philadelphia, Pennsylvania (up 23.6 percent).
Annual home sales increased in all metros Redfin analyzed except in Buffalo, New York (down 6.7 percent); and Memphis, Tennessee (down 1.8 percent). The greatest increase in sales were seen in Bridgeport, Connecticut (up 80.2 percent); San Francisco, California (up 48.5 percent); and Lake County, Illinois (up 47.3 percent).
Intense buyer demand has led to continued declines in inventory. Active listings fell 22.8 percent year over year on a seasonally adjusted basis to their lowest level on record.
“It’s a great time to be a seller, but tough to be a buyer,” San Diego Redfin agent Charles Wheeler said in Redfin’s report. “People walk into a home and think, ‘Wow, this is amazing,’ but 100 other people are thinking the same thing. People are listing their homes and within three days they’re gone.”
The pandemic has put into sharp relief the economic disparity between lower paid service workers in high-risk, high-contact jobs and workers with higher salaries and more flexibility to work from home. While service workers have struggled to make rent and mortgage payments, other workers with more stable jobs during this time have had the means to invest in their homes.
“Low rates are the main motivator for buyers, and they’re also seeing that the pandemic isn’t really slowing down and they want to move into a bigger home with a big backyard,” Wheeler said. “Because of the pandemic, people who have been lucky enough to keep their jobs are saving more money than usual because they’re not going on vacations or going out to eat. They’ve been able to save more toward a down payment and they have the means to buy a home to make their socially distant lifestyles more comfortable.”
More flexible work from home policies and the draw of a less-congested lifestyle outside of a major city has many buyers leaving large metro areas (at least for the time being) and relocating to smaller cities.
For instance, San Francisco and New York City were the only two large metro areas tracked by Redfin that saw increases in the number of homes for sale during September. In San Francisco, the number of homes for sale rose by 51 percent and in New York City, it rose by 20 percent.
“Movement out of places like San Francisco and New York City is having a measurable impact on smaller, more affordable markets around the country,” Redfin’s report reads. “In Western New York, Rochester and Buffalo were two of the most competitive markets of September, with about 60 percent of homes in each metro selling above list price. And Tacoma, smaller and more affordable than Seattle, its neighbor to the north, was the fastest market in the country for the third month in a row.”
However, after months of hunkering down, the number of new listings for September may show early signs of sellers returning to the market with greater confidence. New listings increased 5.9 percent year over year on a seasonally adjusted basis, the third consecutive increase after four months in a row of declines in new listings, and the largest increase in new listings since November 2015.
Sellers who do decide to enter the market will have an advantage — in September, 33.9 percent of homes sold above list price, the highest level ever recorded by Redfin.