Home prices are showing resilience against the coronavirus pandemic, a new Zillow® analysis shows. Sale price growth has cooled slightly, but looks to be headed for an upswing in the coming months — unwelcome news for buyers expecting to score a bargain amid the uncertain economic landscape.
The median price of U.S. homes sold in May was $263,408, up 4.6% year over year. But May marked the second consecutive month in which the annual growth rate slowed from the month prior, down from 5.3% year-over-year growth in April. That comes after a year of near-continuous acceleration that peaked at 5.5% year-over-year growth in March.
The slowdown can be attributed to the change in the types of homes on the market. In April, new listings of the most-expensive homes dropped the furthest and fastest, while affordable listings were less affected. As a result, year-over-year growth in the median list price slowed from 4% in the last week of March to 1.1% in early May. Sales on many of those homes likely closed in May, which would tilt the composition of sales toward more-affordable homes, and ultimately lower the median sale price.
Recent data suggest sale price growth is likely to reverse course soon. New listings of high-end homes have surged, raising the median list price accordingly — list prices were up 4.3% annually as of early July, and have grown 5.8% just in the past two months. Buyers are outnumbering sellers, causing homes to typically sell just 20 days after hitting the market — the lowest level ever recorded by Zillow — and allowing sellers to confidently hold firm on their asking prices, with only 4.1% of active listings in the last week of June having undergone a price cut. These upward pressures on prices are likely to shine through in sale price data in coming months.
“As surprising as it might have seemed at the time, sellers who forged ahead with listing their homes this spring were richly rewarded, when buyers buoyed by record-low mortgage rates flooded their listings with offers,” said Jeff Tucker, Zillow economist. “Now, word is getting out that the housing market is on solid ground, so more listings are belatedly rushing to market, extending the busy spring shopping season well into summer. The huge Millennial first-time home-buying wave is still cresting, pushing demand above what’s still very limited supply, so sellers are likely to find eager buyers for months or even years to come.”
The median sale price was up from a year earlier in each of the 50 largest U.S. metros. Price growth was highest in Indianapolis (+11.8% year over year) and Salt Lake City (+9.8%), and lowest in Las Vegas (+0.8%) and San Francisco (+1.3%).
But annual sale price growth slowed from April to May in most large metros — 31 of the top 50. The biggest slowdowns were in Providence (down 2 percentage points) and Charlotte (down 1.9 percentage points). San Jose (up 2.1 percentage points) and Indianapolis (up 1.4 percentage points) had the steepest accelerations.