According to the National Association of Realtors, contracts signed to buy existing homes, called pending home sales, fell 20.8% from February and fell 16.3% per year.
Regionally, pending sales fell 14.5% in the Northeast for the month and were 11% lower than last year. In the Midwest, sales declined 22% monthly and 12.4% annually. In the South, sales fell 19.5% for the week and 17.8% per year, and in the West, they fell 26.8% per week and 21.5% compared to one year ago.
The existing domestic market was already suffering from a serious shortage of properties for sale, and this supply reached a record level in March. Not only have potential sellers decided not to list their homes in the current economic environment, but some sellers already on the market have written off their properties.
“The housing market is temporarily struggling with the coronavirus shutdown, which has resulted in new registrations and new contracts,” said Lawrence Yun, chief economist at NAR. “As consumers become more accustomed to social distancing protocols and the economy reopens slowly and securely, registrations and purchases will resume, especially given record low mortgage rates. “
The average rate on the fixed 30-year mortgage fell to a new record of 3.43% last week, according to the Mortgage Bankers Association. Mortgages are certainly cheaper, but it is also more difficult to get one. Lenders have tightened their underwriting standards, and some have increased minimum credit scores. The government’s mortgage forbearance program, which allows struggling borrowers to delay monthly payments, has increased risk for the broader market.
Although March’s numbers are bleak, a turnaround may have already started. Applications for mortgages to buy a home, after a dramatic five-week drop, suddenly increased last week, up 12% from the previous week, according to the MBA. These requests were still 20% lower per year, but even this annual comparison was a marked improvement over the previous week.
“The 10 largest states [by normal application volume] purchases have increased, which is potentially a sign of the start of a resumption of the spring home buying season delayed in a pandemic, as coronavirus locking restrictions are slowly easing in various markets, “said said Joel Kan, associate vice president of economic and industrial forecasting at MBA. .
The spring season will remain anemic, however, and even the pent-up potential demand announced in the fall will not be able to offset the losses. Yun now predicts that total home sales for 2020 will be 14% lower per year. However, he does not anticipate large losses in the value of homes.
“In fact, due to the housing shortage, house prices are expected to push a gain in 2020 to a new record,” he added, projecting that the national median house price will increase by 1.3%. for the year, with some market swings and more weakness on the upper end of the market.