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Why it's a seller's market in real estate

Submitted by Tech Insider on August 1, 2020 - 9:00am

Real Estate

  • Sellers are cashing in on the coronavirus pandemic's impact on the US real estate market. 
  • Asking prices are up 13% from last year, profits are up 36%, and Zillow says homes are selling at the fastest rate ever recorded.
  • The typical asking price for a home hit an all-time high in June, and again in July, per Redfin.
  • Visit Business Insider's homepage for more stories.

It's a record-breaking time to sell your home: Asking prices are up 13% from last year, profits are up 36%, and homes are selling at the fastest rate ever recorded by Zillow. 

Though sellers in the top 5% took a hit this spring, non-luxury home prices gained, with Redfin reporting that final sale prices for homes that went into contract in May and June were up 6% from last year, and asking prices on homes listed during the four-week period ending July 12 were up 13%. (Pending home sales have continued to climb, too, up a record 44% in May and 17% in June.)

It's a simple dynamic. The coronavirus pandemic is driving home buyers to suburbs, as reported by Business Insider, while sellers have stayed on the sidelines in greater numbers than usual.

This has left surging demand contending with plummeting supply, resulting in a seller's market. (Inventory fell 28% for the four-week period ending July 12, per Redfin.) 

Record-low mortgage rates — which even fell to below 3% for the first time ever, before ticking back up — have also goosed demand, driving the median home sale price to an all-time high in June

Property data provider ATTOM Data Solutions found that home seller profits rose 36% in the second quarter, a new high since housing began its recovery from the Great Recession in 2012. ATTOM's most recent US Home Sales Report said home sellers nationwide realized an average gain of $75,971 on sales — a 36.3% return on investment —  up from a $66,500 profit, or 34.5%, in the first quarter of 2020 and from $65,250, or 33.7%, in the second quarter of last year. 

"The housing market across the United States pulled something of a high-wire act in the second quarter, surging forward despite the encroaching economic headwinds resulting from the coronavirus pandemic," said Todd Teta, ATTOM Data Solutions chief product officer, in the report.

"Profit margins hit new records as prices kept climbing, with few indications that the impact of the virus would topple the market," according to Teta.

"No doubt, a lot of the ongoing prosperity resulted from gains seen before the pandemic started racing through the country in February and March," he said. The second-quarter results showed continuing strength in most parts of the US, he said. 

The second quarter also saw home ownership reach its highest level since 2008, per Redfin, with the 3.8 percentage point increase to 67.9% the largest rise on record. Redfin said the data may be skewed because the Census changed its methodology during the quarter, eliminating all in-person interviews, but it also said the pandemic "may have moved up [the] timeline" for millennials looking to go from renters to buyers.

Despite the market's apparent strength for sellers, uncertainty around the coronavirus and a potential vaccine and its impact on the near-future of the economy could mean an impending market decline sometime in the next year, though the data from June tells us the downturn isn't here quite yet. 

With all that in mind, now may be the right time to list for sellers looking to maximize profits on their property.

SEE ALSO: The Nobel Prize-winning economist who predicted the housing crash of 2008 sees a fall in urban housing prices. Here's why.

SEE ALSO: There's never been a better time to buy high-end real estate

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