Homes may be the most expensive they have ever been but that’s not stopping buyers from snatching them up.
According to a new study by Redfin, the median home price rose 16% annually to a record-high of $331,590 for the week that ended on March 21st. The number of homes listed for sale on the market at any point during the period declined and fell 42% from 2020 to a new all-time low.
Redfin Chief Economist Daryl Fairweather said, “When the pandemic is over, purchasing a home is going to cost much more than ever before, putting homeownership much further out of reach for many Americans.”
During that period ending March 21st, 58% of home that went under contract had an accepted offer within the first two weeks on the market. And offers are coming in well-above asking price as well. Nearly 40% of homes sold above their list price- another all-time high – and 15 percentage points higher year-over-year. The average sale-to-list price ratio, which measures how close homes are selling to their asking prices, increased to 100.2%.
Many experts think this is concerning because they believe home prices will remain high even after mortgage rates, inventory, and building material costs recover to pre-pandemic levels. Rates are already above 3% – after falling into the 2% range during the majority of 2020 – but construction companies are still struggling to keep up with lumber prices, stifling new builds.
National Association of Home Builders Chairman Chuck Fowke recently noted that supply shortages and high demand have caused lumber prices to jump “about 200%” since April 2020. The elevated price of lumber is adding approximately $24,000 to the price of a new home.
The best chance at home prices lowering is continued rollout of the COVID-19 vaccine, experts said, which will allow lumber mills to reopen and material prices to lower. Builders will then be spending less on new builds, which will help the backlogging of inventory.