Worried about a housing market crash? Don’t be. Demand remains strong, and inventory is moving back up. Here’s a market update from Brian Buffini’s midyear real estate report.
In May, the median price of an existing home in the U.S. soared to a record-high $350,300, up 23.6% from the same time in 2020, according to the National Association of Realtors (NAR). So, have home prices reached a peak?
Lawrence Yun, NAR’s chief economist, doesn’t foresee a “persistent decline” in home prices, perhaps not even a temporary decline. According to the Realtors Confidence Index survey conducted in May, Realtors expected home prices to rise 5.1% over the following three months.
What’s triggering those sentiments? Demand remains strong among homebuyers.
“You have an army of homebuyers who want a second-chance opportunity. They have been outbid. They are frustrated they cannot get into the market,” Yun said during a midyear real estate update hosted by real estate coach and trainer Brian Buffini.
Many members of that army have been shut out by buyers armed with wads of cash. Cash sales made up 23% of home sales in May, up from 17% at the same time last year, NAR says. And about one-third of buyers are paying above the asking price, according to a report issued by Buffini’s company.
Amid robust home prices, Yun predicts the U.S. is on pace this year to exceed the sale of more 6 million existing homes for the first time in 15 years. He believes 2021 will end with a total of 6.1 million existing-home sales, which means a strong housing market.
“We are seeing some topping out in the home sales activity in recent months,” Yun said. “That is to say, we are beginning to see sales approaching pre-pandemic levels. We are past [the recent] surge.”
Nonetheless, the 6.1 million figure would represent the highest total for existing-home sales since 2006. In 2006, one year before the Great Recession, the U.S. recorded 6.48 million existing-home sales, down 8.4% from the all-time high of 7.075 million in 2005, according to NAR. The second highest total in history was 6.779 million in 2004.
As the U.S. moves toward more than 6 million existing-home sales, Yun says the amount of available housing inventory continues to improve. Why? Homebuilding activity is picking up, he said, and some homeowners whose mortgage forbearance is ending may be eager to sell their homes. Furthermore, some owners who put off selling their homes at the height of the COVID-19 pandemic may be ready now to put them on the market, Yun said.
While Yun and other professionals are optimistic about trends in the housing market, consumers may be more than a bit pessimistic. During his presentation, Buffini shed light on consumers’ concerns about the home market by citing the top three housing-related queries on Google:
- When is the housing market going to crash? “People believe a crash is coming, and they’re asking this question all the time,” Buffini said. However, the Buffini report notes that leading economists say a crash isn’t imminent.
- Why is the market so hot?
- How much over asking price should I offer?
“Despite dire predictions, we’re unlikely to see a housing market crash similar to that of the 2008 housing bubble. Those were different times, and the economic factors resulting in that housing crash were much different than today,” the Millionacres real estate investment website points out.