Is the housing market finally improving for buyers after the pandemic rush?

Five-month run of record-setting median home prices comes to end as rush to buy tapers off

Home buyers have faced extreme competition during the pandemic, might there now be light at the end of the tunnel? (Getty Images/iStockphoto)

A five-month run of record-setting home prices has come to an end, according to new data, potentially signalling that the home-buying surge that accompanied the Covid-19 pandemic in the US may be tapering off.

Real estate brokerage firm Redfin released a new report based on aggregated market data from multiple-listing services showing that the median home-sale price did not rise to another record high as it had in each month since March.

Instead, prices were stable in the more than 400 US metropolitan areas covered by the data, dipping 0.2 per cent from the four-week period up to 25 July.

“If these trends continue, home-buying conditions will likely improve (relative to earlier in the summer), with more options and less competition for homebuyers,” says Rachel Musiker, director of communications at Redfin.

The median sale price now stands at $362,750, up 18 per cent year-on-year, indicative of the rush of home buyers looking to snap up property with more space for home-working or a family, for example.

This surge of property purchases saw the birth of the term “Zoom cities” after the omnipresent remote work conferencing tool that allowed people to loosen ties to any central office or specific urban area.

Medium-sized cities that are known for good cultural and lifestyle amenities, with colleges and good connectivity, have been particularly sought after by buyers. These markets are still attractive, so no drop in prices is expected anytime soon, more a slowing of the pace of growth or stabilisation of the market.

A report by UBS cited by Insider in June shows that part of this is because the number of buyers in the market has also dropped as attitudes towards homebuying have soured. Increased competition for houses on the market over the past year has pushed prices out of reach for some, and frustrated others who failed to win bidding wars.

Further driving up prices was a lack of new inventory as home construction stalled or slowed due to supply chain issues and inflationary pressure on materials, though this too now appears to be reversing.

Median asking prices of newly listed homes are still up 18 per cent from the same time a year ago to a median of $358,475, but down one per cent from their all-time high posted during the four weeks ending 27 June.

(Redfin)

A further sign of good news for buyers comes from the average number of active home listings, which rose slightly in July continuing a steady upward trend after falling in 2020 and early 2021. More homes on the market theoretically mean less competition amongst buyers and less bidding up prices. Some sellers may want to get into the market while it remains hot.

The number of homes being listed ticked up 1.9 per cent compared to the four weeks ending 25 July. Active listings were up 13 per cent from their 2021 low hit during the four-week period ending 7 March.

(Redfin)

Sales are still happening remarkably quickly – 49.7 per cent of homes that went under contract had an accepted offer within the first two weeks on the market. That rate has been plateauing of late, but this was the first time it fell below 50 per cent since the four-week period ending 7 February.

More than a third of homes (36 per cent) had an accepted offer within one week of hitting the market. On average, homes were sold in a median of 16 days – 20 days faster than a year ago.

The market may be stabilising, but 54 per cent of homes still sold above the asking price, up from 30 per cent a year earlier. The average home sold for 2.1 per cent above its list price, some 3.1 percentage points higher than a year earlier.

“Although homes are much pricier than they were before the pandemic, homebuyers now have the benefit of very low mortgage rates and a little less competition than they faced earlier in the summer,” said Redfin Chief Economist Daryl Fairweather.

If you are braving the housing market anytime soon, Redfin also has data on the most competitive cities.

The top ten are Littleton and Aurora in Colorado; Tacoma and Spokane in Washington; Grand Rapids, Michigan; Sacramento, California; Omaha, Nebraska; Colorado Springs; Riverview, Florida; and Denver.