Existing-home sales for 2020 reached their highest level since 2006 as more Americans sought larger living spaces as they adopted work-from-home policies in the wake of the coronavirus pandemic.
Existing-home sales, which include transactions of single-family homes, townhomes, condominiums, and co-ops, increased 22.2% year-over-year, according to the National Association of Realtors (NAR). Home sales for December increased 0.7% from November to a seasonally-adjusted annual rate of 6.76 million.
"Home sales rose in December, and for 2020 as a whole, we saw sales perform at their highest levels since 2006, despite the pandemic," said Lawrence Yun, NAR's chief economist. "What's even better is that this momentum is likely to carry into the new year, with more buyers expected to enter the market."
NAR expects the strong activity to continue in 2021 as mortgage rates hover near record lows at around 3% and economic conditions hopefully improve with added stimulus and vaccine distribution.
An Uneven Distribution
The U.S. housing market has highlighted the growing disparity between upper- and lower-income Americans exacerbated by COVID-19 as owners of homes worth more than $100,000 welcomed a hot sellers market, while owners of less expensive homes saw a decline in sales.
The stark contrast between upper- and lower-income Americans strengthens the view that the U.S. will see a K-shaped recovery as its economy bounces back from the effects of COVID-19. Nearly 8% of homeowners, or 10 million people, said they are not caught up on their mortgage payments at the end of December, while nearly 4% of them said they have no confidence in their ability to make next month’s mortgage payment, according to the U.S. Census Bureau.
Under President Joe Biden’s proposed $1.9 trillion stimulus package, the current eviction and foreclosure moratoriums, which are scheduled to end in March, will be continued through September.
A Hot Housing Market
The end of 2020 saw less houses on the market as individuals quickly bought homes in a rush to leave cities for suburbia. Total housing inventory at the end of December totaled 1.07 million units, down 16.4% from November and 23% from the same period in 2019, NAR said.
Properties typically remained on the market for just 21 days in December, nearly half the time they sat on the market in Dec. 2019, and 70% of the properties sold in Dec. 2020 remained on the market for less than a month.
First-time buyers were responsible for 31% of sales in December, while individual investors or second-home buyers, who account for many cash sales, purchased 14% of homes in December.
The median existing-home price for all housing types in December was $309,800, up 12.9% from the same period last year as prices increased in every region in the country. The West was the most expensive region, with a median home price of $467,900, while the Midwest was the least expensive region with a median price of $235,700, NAR said.
Home builders and home improvement retailers have benefitted from the surge in homebuyer interest. Shares in construction companies PulteGroup, KB Home, and Toll Brothers have surged 58%, 80%, and 87%, respectively, since mid-March when the pandemic hit the U.S.
"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."