June 2020 Housing Market Outlook

Each month we are posting an updated Market Outlook based on the questions we receive from clients, employees, and investors about the implications for the housing and mortgage markets in which we are active (read May's Outlook here).

As states across the country have started re-opening, we are seeing restrictions relax in the states in which we operate, and corresponding near-immediate increases in real estate activity in our markets:

• In Virginia, Governor Ralph Northam relaxed the “stay at home” order with the May 15th announcement of Phase One of the Forward Virginia plan, allowing many businesses to re-open with restrictions.
• On May 18th, Governor Phil Murphy announced a multi-phase plan to begin opening businesses across New Jersey.
• In Pennsylvania, Governor Tom Wolf issued an executive order that allowed real estate activity to proceed on a statewide basis starting on May 19th following what was essentially a two month shutdown (and on June 5th we are expecting all counties in the state to open under “yellow” phase restrictions).
• In Maryland, most businesses are now permitted to open as of Gov. Larry Hogan’s May 27th executive order.
• In the District of Columbia, Mayor Muriel Bowser lifted DC’s “Stay at Home” order on May 29th.

Many restrictions and safety guidelines will still remain in place, but in all of the states in which we operate the economy has seen a significant jumpstart for the first time since March.

Housing 

Houwzer is seeing a huge increase in demand for real estate transactions. We are currently setting all-time records for homes put under agreement weekly. We believe the pent-up demand caused by the various shutdown orders is creating a surge in demand for our services.

Once the backlog clears, we expect the continuation of the pre-COVID seller’s market at least for the short term, though there are some signs of the market softening. In April, we saw inventory increase to around 4.5 months up from 2 months in our Greater Philadelphia market. In the Greater DC market we saw 1.4 months up from 1.1 months of inventory in the same time period, and in Greater Baltimore we saw inventory rise to 2.2 months from 1.8 months of inventory.

Because the restrictions imposed due to Coronavirus were at their peak in April, it is still too early to extrapolate whether or not this is a lasting trend or an anomaly due to severe restrictions. Given that the inventory spikes were greater in the regions with more severe shutdowns, there does seem to be a causal relationship that may dissipate as restrictions are relaxed. The May and June inventory data will be critical data points to watch in determining whether there is a trend developing, or if there will be a reversion to the extreme seller’s market that we’ve seen for several years now.

Because monthly reporting cycles don’t tell the whole picture in such a dynamic environment, we built a custom daily report for 2020 year-to-date, showing Closed, New and Under Agreement listings on a daily basis across all our markets through 5/27/2020:

Source: Houwzer

Closings have almost completely dropped off in April and May. Some of this may be due to a lag in reporting due to many real estate offices being closed, and some of this may be due to the fact that many buyers and sellers were not able to find safe ways to close and hence pushed out agreements. We expect that closings will start to exceed the levels seen at the beginning of the year as the state re-openings kick in, and as more inventory comes onto the market.

New listings started to take off in the beginning of March, which is the normal seasonal pattern but quickly pulled back as restrictions and the pandemic worsened. However, in May we are starting to see more normal seasonal listing activity in terms of new listings coming onto the market, culminating in over 1000 listings hitting the market in a single day on May 27th.

Correspondingly, almost as fast as these listings are coming onto the market, they are going under agreement. Buyer demand is still extremely strong, and though it’s too early to officially say, it looks like the market will continue to be a seller’s market for the late spring season that is emerging.

Mortgage

In the mortgage market, we’ve seen demand for refinancing continue to soar as rates have fallen and continue to push all-time lows:

Source: Mortgage News Daily

Though we expect these conditions to continue, you can see from the historical pattern that when rates do rise, they tend to rise very sharply. We still believe it is the best period in history to refinance a home, and though rates are still trending down they could reverse course with little warning. If you plan on staying in your home and your current mortgage rate is 3.75% or higher, it is probably worth speaking to our mortgage advisors to find out if refinancing can reduce your monthly mortgage payment, or allow you to take cash out of the equity in your home.

Even though there is still plenty of uncertainty ahead, the path forward is becoming more clear, and both present and historical data allow for a hopeful outlook. Houwzer’s commitment to providing local, expert guidance to homeowners when they buy and sell will continue to be a beacon to our clients.

- Mike Maher, Houwzer CEO