The global pandemic disrupted nearly every aspect of social life in 2020, ending the longest economic expansion on US records as millions were laid off or on leave. However, through a unique mix of market forces, the residential real estate market for sale has become a pillar of growth and a source of optimism and opportunity for many in an otherwise bleak year.
The rental market, on the other hand, fared worse: the appreciation of rents slowed down and tenants were disproportionately affected by the pandemic.
Although the market paused briefly in the spring due to uncertainty and widespread stay-home orders, 2020 was a record year for residential real estate. The triple demand for low mortgage rates, waves of first-time buyers, and changing consumer preferences and remote working options combined with supply shortages and changing rental patterns brought many housing statistics to extremes. And given the pandemic, we expect 5.7 million households to switch hands by the end of the year. 5.9% more than 2019.
In September, every fifth home sold above list price – about 50% more than long-term norms. The typical market duration for houses in October was up to 12 days – regardless of the price at breakneck speed. By November, house values had risen 1.1% since October and 3% since the previous quarter – the largest monthly and quarterly gains in the Zillow records since 1996. Inventories declined every week from early June until December 12th was 34.3% below the 2019 level.
Rents never fell in the US, but year-over-year growth fell to just 0.7% in October. This was the lowest annual growth since the Zillow Observed Rent Index began in 2015. Typical rents in November were only $ 4 higher than in January.
Unlike the mortgage crisis and the financial collapse of the Great Recession, which caused property values to decline, this booming market is built on responsible, stable credit and a mix of solid property market fundamentals. In response to these forces, soaring prices resulted in the largest increases in home equity since 2014 and provided homeowners with additional protection from future downturns.