Boots & Sabers

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0945, 21 May 20

Real Estate – Sales Down, Prices Up

Interesting data here. It’s hard to tell if the decline in sales is a result of fewer buyers or the lack of inventory to buy. It is probably some of both. In any case, if you are selling a house, this looks like a great time to do it before the foreclosures hit the market, flood the inventory, and lower prices.

Sales of existing homes fell 17.8% month-to-month, and were 17.2% lower than April 2019, seasonally adjusted, according to the National Association of Realtors. That puts the annualized pace at 4.33 million units, the slowest sales pace since September 2011.

These numbers are based on closed sales, not signed contracts, so they represent contracts signed in late February and March. The April drop in closings is the largest one-month decline since July 2010, when the homebuyer tax credit, a federal stimulus resulting from the subprime mortgage crash, expired.


The supply of homes for sale fell 19.7% annually to 1.47 million units for sale at the end of April. That is the lowest April inventory figure ever. Not only did potential sellers decide not to list their homes, as job losses mounted and the economy shut down, but some sellers already on the market pulled their listings.

That drop in inventory pushed prices to a new record high. The median price of an existing home sold in April rose 7.4% annually to $286,800. That record does not account for inflation, but is a nominal record-high.

The thing about real estate is that it is time sensitive. Many people are buying because of a life change – move, new job, new kid, etc. That demand is relatively inelastic with economic fluctuations. The elastic part of the demand are investment buyers. This is the wild card. Some investment buyers are likely sitting this one out because their net worth has been hammered. But another group of investment buyers might be more active in real estate in anticipation of inflation and a decline in the equity markets. Inflation always drives up the prices of hard assets, so real estate is a good hedge. But many of these investors are probably going to wait until the foreclosures hit and prices are better.


0945, 21 May 2020

1 Comment

  1. dad29

    Saw a Nooz story this AM about some Aussie who was buying investment property in the suburbs, specifically avoiding Big City properties of any sort.

    As to ‘sellers’ market’ theory–that’s all good IF your prospective buyers still have jobs.

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