Despite the early days of the pandemic effectively halting the real estate market — and the global health and humanity concerns that continue to persist — U.S. existing-home sales in 2020 soared to a level not seen since before the Great Recession.
Existing-home sales in 2020 finished the year up 5.9 percent from the year prior, with 5.64 million total existing-home sales, the highest number since 2006, according to data released Friday by the National Association of Realtors.
“Home sales rose in December, and for 2020 as a whole, we saw sales perform at their highest levels since 2006, despite the pandemic,” NAR Chief Economist Lawrence Yun said in a statement. “What’s even better is that this momentum is likely to carry into the new year, with more buyers expected to enter the market.”
Total existing-home sales continued to gain momentum into the end of the year, climbing 0.7 percent from November to December and finishing 22.2 percent ahead of last December’s total.
Yun believes the existing momentum will continue to carry into 2021.
“Although mortgage rates are projected to increase, they will continue to hover near record lows at around 3 percent,” Yun said. “Moreover, expect economic conditions to improve with additional stimulus forthcoming and vaccine distribution already underway.”
Prices also soared to historic highs, climbing 12.9 percent year over year to a median price of $309,800. It’s the 106th straight month of annual price gains.
One of the main reasons prices continue to rise is the lack of inventory on the market, which hit a new record low in December 2020. At the end of the month, there were 1.07 million housing units for sale, down 23 percent from a year ago. Unsold inventory was at 1.9-months supply at the current sales pace, down from 3.0-months supply in December 2019 and the lowest level since NAR began tracking the data in 1982.
With such low supply, homes are flying off the market. Existing-homes typically sat on the market for 21 days in December 2020, down from 41 days in December 2019.
Recent Construction data shows that builders are far outpacing last year’s construction levels, but the inventory problem may take years to solve, Yun said.
“To their credit, homebuilders and construction companies have increased efforts to build, with housing starts hitting an annual rate of near 1.7 million in December, with more focus on single-family homes,” Yun said. “However, it will take vigorous new home construction in 2021 and in 2022 to adequately furnish the market to properly meet the demand.”
The inventory and affordability challenges have led to disproportionate growth in higher-priced tiers, according to Joel Kan, the associate vice president of economist and industry forecasting at the Mortgage Bankers Association. December average loan sizes were the highest ever recorded in the company’s weekly market survey.
“More acute affordability challenges will emerge if inventory stays this tight and home-price growth continues to accelerate,” Kan said, in a statement. “This, in turn, would be especially challenging for first-time homebuyers, who make up a third of all home sales.”