New data from Redfin (NASDAQ: RDFN) shows how homebuying demand has skyrocketed and is up 22% from pre-pandemic levels in January and February. This is the seventh consecutive week of increased demand from a bottom hit in mid-April. Demand peaked on May 28, at 25% higher than the beginning of 2020.
The main reason for this is that inventory is down substantially, 24% year over year to be exact. This has buoyed prices and kept demand high. Compared to this time last year, median sales prices are up 7%, and this is only looking to accelerate as we enter the summer selling season and the continued reduction of stay-at-home orders.
There's an equally important shift in buyer preferences as well. Adam Wiener, chief growth officer at Redfin, notes, "In many cases, buyers aren't looking in big cities, at all. In April and May, page views on Redfin.com for homes in cities with fewer than 50,000 residents and rural areas are growing five times faster than page views for homes in cities and suburbs with more than a million people." The trend toward remote work and small-town living is certainly a critical one for investors to understand.
Indeed, Mike Welk, a RedfinNow asset manager in Denver, said, "I am hearing a lot more from people who are looking further out of Denver. They think, 'If I only have to go into the office three days a week, I can drive an extra 10-15 miles, save a bundle, and get a bigger place.'"
Mortgage rates hitting record lows (again!)
According to Freddie Mac, mortgage rates have been dropping steadily since January. The 30-year average mortgage rate is sitting at 3.2%, down 600 basis points from this time last year.
Further, according to data from Optimal Blue via HousingWire, the average 30-year rate dropped to 3.13% last week. The previous record low was 3.15%, in May of this year. We saw stock markets soar last week, and then when the reality set in with tough labor numbers, stocks dropped again. As equities drop, so, too, do bond yields and ultimately mortgage rates (which follow bonds). This is the primary reason for the current mortgage rate drop.
With record-low mortgage rates and limited housing supply, real estate prices and markets remain one of the economic bright spots as of late. Because real estate is a lagging indicator, this is certainly not the end of the story. But so far, real estate may be in a position to lead a V-shaped recovery.