Annual home sales may drop 14% due to strained spring buying season
The disruption of the coronavirus pandemic caused pending home sales to fall in March. The losses are expected to reverberate through the rest of 2020, according to the National Association of Realtors.
The Pending Home Sales Index, which sits at a baseline of 100, plummeted 20.8% to 88.2 last month. The index had hit a three-year high in February, marking the largest monthly jump since 2010 in January. March contract signings dropped 16.3% from March 2019.
"The housing market is temporarily grappling with the coronavirus-induced shutdown, which pulled down new listings and new contracts," Lawrence Yun, NAR's chief economist, said in a press release.
Any recovery later in the year won't salvage the loss of the normally strong spring home-buying season, Yun said, adding that he anticipates overall sales volume declining 14% annually.
Quickly adapting to technology and virtual tools could help to curb lost business. Out of 2,915 NAR members surveyed on April 20, 58% said buyers used virtual tours and 43% reported buyers used e-closings. But only 27% of Realtors could complete their end-to-end transactions remotely.
"As consumers become more accustomed to social distancing protocols, and with the economy slowly and safely reopening, listings and buying activity will resume, especially given the record low mortgage rates," said Yun.
Regionally, COVID-19 hit pending home sales in the West hardest, dropping the PHSI 26.8% to 71.4, down 21.5% from the year prior. The Midwest's index score was 85.6, down 12.4% year-over-year. The South fell 17.8% from March 2019, but its index of 103.7 stands above the others. The Northeast's PHSI decreased to 82.3, an annual drop of 11%.
Prices, however, remain impervious to the impact of the pandemic, held up by the enduring lack of supply.
"In fact, due to the ongoing housing shortage, home prices are likely to squeeze out a gain in 2020 to a new record high," Yun said. "I project the national median home price to increase 1.3% for the year, though there will be local market variations and the upper-end market will likely experience a reduction in home price."