The housing market continues to be a bright spot for the economy with increased interest from buyers for single family housing. If homes continue to sell at the current pace, we may remain in a seller’s market all winter. In Michigan, there are many factors that lead to the slowing of sales in the colder months but due to the shutdown in spring, we currently see a carryover of demand from buyers who are still interested in the limited inventory available.

Delayed Cooldown

2019 was a strong year and, in the midst of the global pandemic, the summer months provided a record number of sales in 2020. Even better, recent new pending contracts are still hitting highs, which will ensure strong closed sales through the fourth quarter as we head into winter.

While it may seem like the market is slowing, it may take an extra month or two to really cool off. The third quarter set new records for both closed sales and home values. Monthly price per square foot for a typical year peaks in July, but this year it looks to have been pushed back to September. Furthermore, days on market have also been on the decline through September indicating that homes are still selling quickly.

Out of Supply

Inventory is down 48% from 2019, while pending sales are up 35% from last year. Tight supply has created heavy competition among buyers for homes in our market. Months supply of inventory increased just slightly from last month up 4%. In 2019, months’ supply of inventory was at 2.9 months in September, in comparison right now we only have 1.2 months of supply which is not typical this time of year. Months’ supply refers to the number of months it would take for the current inventory of homes on the market to sell given the current sales pace. Historically, six months of supply is associated with moderate price appreciation, so lower levels of supply tend to push prices up more rapidly. Sellers who haven’t gotten a quick hit should remain patient and give buyers time to take a second look and make a deal.

Buyer Pipeline

Mortgage applications are up 30% from a year ago and there are plenty of active buyers lined up in the pipeline. This is great news for sellers as the strong demand has been driving up prices faster in the past few months than at any time in recent years. While this is fantastic for a homeowner’s equity, the limited inventory, rapid price increase and growing competition may choke off some of the buyers that are trying to move through the market. When first-time homeowners are unable to complete the purchase process, the rate of homeownership declines.

Working from home for good?

Most teleworkers expect to continue at home even after a Covid Vaccine. While not all industries and positions have this luxury, many may not be going back to the office. Currently about 3 out of every 10 adults are working from home either full or part time. Sixty-one percent of those working from home believe they will continue to work from home even after a vaccine is distributed. How will this impact home buying priorities and decisions? If around 20% of the working population goes home full time, they may be putting more of an emphasis on home expenditures.

Noteworthy News

• Builder confidence reaches record high.
• Coronavirus-related evictions delayed until 2021.
• Single-family housing starts reaches highest levels since 2007.
• Coronavirus second surge beginning to show signs across the country. Michigan numbers are on the rise.
• Mortgage rates fall to a record low for the 11th time this year.
• Second stimulus negotiations have been delayed, most likely to come after the election.