Earlier, we discussed how the new construction sub-market of the real estate market was booming; today, we discuss the fact that existing home sales are also thriving. While it is reasonable that the Great Recession dampened our faith in the housing market, the proof is in the pudding that the real estate market is truly resilient; it has withstood what may very well be a forced paradigm-shift is our understanding of modern economics, and it has consistently exceeded expectations.
On November 19, 2020 the National Association of Realtors (“NAR”) reported that existing-home sales increased to a seasonally adjusted rate of 6.85 million (about 350,000 higher than Economists predicted), which represents a 4.3% increase since September 2020. Moreover, the 6.85 million figure is 27% higher than September 2019, and the highest figure recorded in 15 years. 70% of the homes placed on the market sold in 30 days or less. This is all occurring during a period of time where unemployment is soaring, confidence in economic outlook is plummeting, and policy makers are being forced to rethink modern economics.
Notwithstanding the housing market’s overperformance, there is still significant concern about the available inventory of homes on the market (a significant factor in the explosion of new construction projects of single-family homes). By December 2020, the available inventory of homes for sale will sit around 2.5 months of inventory, this is the lowest ever recorded; economists posit that the market is balanced when inventory is at 6 months.
While an imbalance in the housing market is not a cause for immediate concern, it is worth noting that most markets balance themselves out eventually. In this context, housing prices will likely get to a point where the market won’t bear it; houses will remain on the market, and inventory will increase until those prices drop. Alternatively, new-construction projects will increase the supply, slowing down the rapid price increase in residential property. For now, sellers are in an excellent position to obtain a premium price for their home.
At the Chernov Team we understand that knowledge is power, and knowledge of how the housing market is behaving is powerful knowledge indeed. At the Chernov team we know that whoever comes to the table most prepared leaves with the most, and the Chernov Team
always leaves the table with the most.