Data released Tuesday, May 12, from the National Association of Realtors (NAR) shows that house prices increased in the first quarter of 2020 despite the ongoing pandemic. The NAR's quarterly report on metro home prices shows that the median single-family home price increased year over year in 96% of U.S. markets in the first quarter of 2020, versus 94% in the first quarter of 2019.
Further, home prices for the first quarter of 2020 sat at $274,600, an increase of 7.7% from the same period in 2019. Forty-six metros, particularly in Western and Southern markets, saw price jumps of double digits, including Boise City, Idaho (18.1%), Eugene, Oregon (14.5%), and Colorado Springs, Colorodo (14.4%).
The NAR report shows that all regional median single-family sales prices rose when compared to 2019: Northeast (9.7%), Midwest (7.5%), South (7.5%), and West (7.5%).
NAR Chief Economist Lawrence Yun noted that "The first quarter price jumps mostly reflect conditions prior to the coronavirus outbreak and show the strength of the housing demand prior to the pandemic." Yun added that "Even now, due to very limited listings, home prices are showing no signs of buckling."
So why are home prices holding steady? Real estate is a lagging economic indicator, meaning a slowdown in home price growth will likely be prolonged over the next several quarters and years. And we've seen years of tight supply across most U.S. markets, which will help buoy prices.
"Supply is extremely limited, and there are simply not as many homes for sale to meet the demand among potential buyers," Yun said. "More supply and more listings are needed to provide a faster recovery for the economy."
Couple low supply with low interest rates, and demand for housing is looking as though it will remain strong in the short term, keeping prices stable. By the fourth quarter of 2019, NAR reports that there were 1.5 million homes available for sale, which was 10% less than the beginning of 2019.
It's too early to tell exactly what effect the pandemic will have on the housing sector long term, but early signs point to a potential downturn that hasn't yet begun. What appears clear is that a 2020-2021 economic downturn will be much different from what we saw in 2008.