Low inventory, cyclical slowdowns mean a housing market functioning below capacity.
Pending sales were up through May, June, and early July. The level of closings for June was nearly as high as they were in June 2019 in many markets. The surge, which started in early May, seems set to continue through at least the end of July and maybe into August.
Record-low interest rates are fueling much of this surge, along with some indications that families are also rearranging where they live. Reports from suburban realty firms and agents—as well as from leading firms in the ex-urban and rural property markets—show an increased level of activity. While much of this anecdotal, it’s so widespread across the country as to give it credence. Much of the May-through-July surge can be credited to packing 90-120 days of buying activity into 60 days.
There will be a cyclical slowdown as autumn approaches. Reports from across markets indicate that listing inventory is down in most markets, below the level of last year when it was already low. Housing markets cannot function at full capacity when little inventory exists. Unless home builders can start adding 1 million or more new housing units a year, most markets will be faced with scarce inventory and rising prices—just when 20 million+ American workers and businesses are trying to reopen.
Economists from several sources, including NAR, Realtor.com and Zillow, believe that unit sales will not totally recover this year. A rough average of their forecasts indicates unit sales would be down 12%-15% from 2019 by the end of this year. Should they be on the mark, then sales in the fourth quarter will be softer than last year.
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