June 22, 2020
On June 22, the National Association of Realtors released its Existing Home Sales Report for May. Although Orion’s brokers tend to see more refinance business, we feel it is important for our clients to see nationwide residential mortgage trends, and in new construction. It is also important to know what young, potential buyers are thinking. COVID has changed the way we think. Who wants to get onto an elevator? Who wants a small home? Builders expect more demand for larger homes.
The most noteworthy data point in the May existing-home sales report was that existing housing supply last month was down almost 19% compared to a year ago. As buyers are returning to the market, as evidenced by the strong, nine-week rebound in MBA’s purchase application data, the lack of homes for sale will be a real constraint. Although demand certainly dropped in March and April due to the crisis, supply dropped even more, and has thus far kept home prices from declining. We expect that home-price growth will pick up over the summer due to insufficient supply levels. And given low rates, one expects the refinance business to continue.
The market is supported by strong demand from first-time homebuyers, who represented 34 percent of home purchases in May. Orion’s management believes millennial-driven demand will be a tailwind for the market for the next several years. The market has indeed shifted in terms of new construction. Low density, high density, things are going well. Many educated people in their late 20s and 30s have remained employed this year, and don’t want to “settle” for a starter home, and builders report interest in more traditional housing.
When we began 2020 one could feel the excitement in the economy and with builders. But when COVID progressed through March and April and May, much of the positivity and elation had vanished. Orion is seeing that mood return in builders, real estate agents, and brokers. Current volumes suggest that our industry is on the upswing – a fine place to be.