How’s the Market? Real Estate During a Pandemic

For the first time since February, new listings in the Portland Metro Area increased compared to the same time last year. Pending sales also continued on their upward trend, with an increase of over 20% compared to last year. Pending Sales far outpacing New Listings pushed inventory down even farther this month to 1.2 months. This is the lowest inventory we’ve seen in almost 5 years. December of 2015 was the last time inventory dropped below 1.3 months; at that time, the median home price was just $320,000 — $115,000 lower than the current median home price. The near record low inventory helped push the Median Home Price up to $445,000 in July – 8.1% higher than the same time last year. We have not seen prices increase this much year-over-year in two and a half years.

Real Estate During a Pandemic

As in all aspects of the economy, 2020 has been a unique year for the Real Estate industry. July marked the 4th month after the start of the Pandemic in the United States. Looking back at these four months compared to the last two years, we see the impact that the state-wide shutdown and subsequent record low interest rates have had on the Median Home Price, Inventory, and Closed Sales.

The seasonal trend we typically see with the Median Home Price is lower in the winter months, then a gradual rise through the spring, peaking in May or June, then tapering off through the summer and fall. This year, we saw prices increase through March, then actually decrease slightly in April, rebound in May, and rise rapidly through July. The unusual dip in April and May is no doubt due to the local economy shutting down due to the pandemic. The sharp increase in prices we’ve seen since then is being fueled by a number of factors:

  1. Shutting down the State back in March meant a lot of people who were in the market to buy put their search on hold. Those who are still employed and have strong credit are coming back into the market along with those who would have already been shopping during this time.
  2. Interest rates continue to be at an all-time low, further enticing buyers to enter the market.
  3. Record low inventory means all these buyers are competing for fewer homes, thus pushing up prices.

Inventory follows a less predictable seasonal pattern than prices, but still tends to fall in the beginning of the year, rise through the spring and summer, then peak in late summer before dropping again into the winter. This year, Inventory followed its typical pattern through March, but jumped up in April as buyers left the market due to the shutdown, and has since crashed to an almost 5-year low of just 1.2 months. That crash also came about due to buyers flooding the market and competing for existing homes.

Closed Sales has also bucked seasonal trends by falling sharply in April and May. May is typically right in the middle of the busiest season for Real Estate, so to see the number of closed sales drop to February levels in May is very unusual. However, Closed Sales have rebounded strongly, and in July we saw more home sell than in any month in the last five years.

What’s Next?

With so many market indicators going rogue this year, can we accurately forecast what the market will do in the coming months? We can certainly try! Many buyers and sellers are still making up for lost time from earlier this year, so we anticipate the increased activity to continue through August and potentially September, eliminating the lazy late summer slump we sometimes see. Along with all the uncertainty the pandemic has brought, this is also an election year, which means we activity in the market is likely to slow down in the fall through election day in November. But with both interest rates and inventory both at record low levels, expect to see prices continue to climb for the next few months.

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