Housing Recovery Holds but Faces Hurdles Going into the Fall

Housing Market Recovery Index Highlights – Week Ending August 29

  • The realtor.com Housing Market Recovery Index reached 106.2 nationwide for the week ending August 22, 6.2 points above the pre-COVID baseline but down 0.4 points over last week. 
  • The demand/supply imbalance has  furtherintensified, with this week’s housing demand index jumping to 124.3 and the housing supply index dropping back to 92.6.
  • Locally, a total of 43 markets have crossed the recovery benchmark as of this week, the highest since March, with the greatest recovery in Las Vegas, Seattle, Philadelphia, Boston, and Riverside-San Bernardino.

Download the full Housing Market Recovery Index dataset here.

National Recovery Trends

Real estate activity continued to grow above the pre-pandemic pace for the seventh week in a row but rapidly evaporating supply may be starting to slow the recovery. The realtor.com Housing Market Recovery Index reached 106.2 nationwide for the week ending August 22, 6.2 points above the pre-COVID baseline but down 0.4 points over last week. 

This week’s move represents only the second decline in the overall index since early June, and shows the gap between buyers and sellers continues to widen. The ‘housing demand’ component stayed well above recovery and reached 124.3, the highest index value since March. However, the ‘housing supply’ component declined back down to 92.6, after having surpassed the recovery threshold four weeks ago. The reversal in new listings improvements is worrisome for first time home buyers in particular, and fails to provide an outlet to rapidly escalating home prices.

The post-pandemic period has brought a record number of homebuyers back into the market, but it’s also failed to bring a consistent number of sellers back. Homes are selling faster and sales are still on an upward trend, but rapidly disappearing inventory also means more home shoppers are being priced out. If we don’t see material improvement to supply in the next few weeks, we could see the number of transactions begin to dwindle again even as the line up of buyers continues to grow.

Week ending 8/29 Current

Index

w/w change
Overall Housing Recovery Index 106.2 -0.4
Housing Demand Growth Index 124.3 +0.3
Listing Price Growth Index 107.0 +0.3
New Supply Growth Index 92.6 -2.9
Pace of Sales Index 113.1 +1.3

The ‘housing demand’ component – which tracks growth in online search activity – remained visibly above recovery, with this week’s index reaching 124.3, up 0.3 points over the prior week and 24.3 points above the January baseline. Homebuyer interest continues to outpace last year levels as detected on realtor.com over the last few months. While record-high prices, short supply and economic headwinds pose significant challenges, the pool of ready-to-transact buyers continues to grow.

Powered by a backlog of demand, the ‘home price’ component – which tracks growth in asking prices – increased by 0.3 points last week, and is now at 107.0, 7.0 points above the January baseline. With supply at record lows and buyer competition on the rise, sellers have regained leverage, enabling the fastest price growth recorded since January 2018. As inventory and foot traffic grow through the end of the summer, we’ll get a good indication of whether higher asking prices will translate into higher selling prices.

The ‘pace of sales’ component – which tracks differences in time-on-market – continues to remain above the pre-COVID baseline. The time-on-market index increased to 113.1, up 1.3 points from last week.  It is 13.1 points above the January baseline, suggesting buyers and sellers are continuing to connect at a faster rate and setting up the peak homebuying season in August.

Notably, the ‘housing supply’ component – which tracks growth of new listings – declined for the third week in a row, to 92.6, down 2.9 points over the prior week, and 7.4 points below the January baseline. The temporary boost in new listings seen earlier came as the summer season replaced the typical spring homebuying season. More homes entered the market than typical for that time of the year, but this seasonality boost appears to be waning, and further improvement could be limited going into the fall as the peak cycle subsides.

Local Recovery Trends

All Four Regions Remain Above Recovery Pace

Regionally, the West (113.4) continues to lead the pack in the recovery, with the overall index now visibly above the pre-COVID benchmark. The Northeast (110.0), South (103.2), and Midwest (103.4) also remain above recovery pace, however the Northeast was the only region to see an improvement in its score this week. 

Social distancing and economic resilience continue to be key factors driving local differences in the housing recovery. Per our earlier research, the spread of COVID-19 is closely linked to the housing slowdown, with markets with higher cases per capita more likely to see a bigger impact on supply and the pace of sales. The speed and sustainability of the reopening, and each market’s ability to contain COVID-19, are dictating the speed of recovery across the regions. Finally, resilient economies may have an edge in the housing recovery, and areas with strong job markets before COVID-19, especially those with thriving tech sectors, are seeing buyers and sellers reconnect faster than the rest of the country.

Region Avg Recovery Index

(week ending 8/29)

Weekly
Change
West 113.4 -1.1
South 103.2 -0.3
Northeast 110.0 +0.9
Midwest 103.4 -0.4

43 of 50 Largest Markets Now Above the Recovery Benchmark

Locally, a total of 43 markets have crossed the recovery benchmark as of this week, one less than the previous week. The overall recovery index is showing greatest recovery in Las Vegas, Seattle, Philadelphia, Boston and Riverside-San Bernardino. Markets in the sunbelt (Florida, Georgia, Louisiana, Alabama) and parts of the Midwest (Michigan, Indiana, Wisconsin) have struggled to recover but appear to be re-emerging going into the fall, albeit at a slower pace.

In the ‘housing demand’ component, all 50 largest markets are now positioned above the recovery trend. The most recovered markets for home-buying interest include New York, Miami, Minneapolis, Riverside-San Bernardino and San Francisco, with a housing demand growth index between 141 and 155.

In the ‘home price’ component, more than half of markets are now positioned above the recovery trend, with 30 of the 50 largest markets seeing growth in asking prices surpass the January baseline, one less than the previous week. In the top 10 most-recovered markets, asking prices are now growing at 12 percent year-over-year, on average. The most recovered markets for home prices include Pittsburgh, Austin, Cleveland, Louisville and Riverside-San Bernardino, with a home price growth index between 109 and 113.

In the ‘pace of sales’ component, 47 of the 50 largest markets are now seeing the time on market index surpass the January baseline, unchanged from last week. In the top 10 most recovered markets for pace of sales, time-on-market is now down 24 percent, on average, year-over-year. Interestingly, markets where time on market is recovering the fastest tend to be faster moving than those with a slower recovery, suggesting seller markets pre-COVID may be better positioned for recovery in the months ahead. The most recovered markets for time-on-market include Los Angeles, Boston, Las Vegas, Virginia Beach and Baltimore, with a pace of sales growth index between 131 and 149.

In the ‘housing supply’ component,14 of the 50 largest markets saw the new listings index surpass the January baseline, 5 fewer than last week. Interestingly, markets where new supply was improving the fastest tended to be higher priced than those that had yet recovered, suggesting sellers were returning faster in the more expensive markets. The most recovered markets for new listings included Las Vegas, San Jose, Seattle, Phoenix and Denver, with a new listings growth index between 114 and 113.



How to read the index – the overall index is set to 100 for the last week of January based on average year-over-year trends that month, and updated every week relative to that baseline. A value of 100 means the market has recovered to January 2020 pace. The higher the index value, the higher the level of recovery. The lower the index value, the lower the level of recovery. 


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