COVID spurs early start to spring homebuying season: ‘A mad dash’

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Spring homebuying season has no official kickoff date, but it usually starts right about now in many areas of the country.

Usual years don’t combine a housing boom and a pandemic, however. The 2021 spring market began far earlier than normal in many metros and areas across the nation, according to industry data and housing experts. Some say buyer interest and activity have barely waned since last spring. This comes amid a rise in mortgage rates, which are still low by historical standards, and a severe inventory shortage in much of the U.S.

“Since mid-summer last year, the U.S. single-family housing market has been rebounding strongly. Instead of the typical winter lull, home sales and house prices continued to climb in the fourth quarter of last year and into the early months of 2021,” says Leonard Carl Kiefer, deputy chief economist and senior director at mortgage giant Freddie Mac. “So we never really had a winter slowdown and clean break between the next spring homebuying season.”

Bob Bradley, a Realtor in Orange, California, echoes those thoughts.

“There will be no spring homebuying season in 2021, as we’ve been in it the entire time,” he says. “Major markets haven’t had the chance to experience the typical winter decline in sales typically seen pre-pandemic. With interest rates starting to rise, buyers continue to scramble and compete with over-asking offers on single-family homes.”

Bradley notes that hopeful buyers are feeling increased confidence thanks to current vaccination efforts and a bounce-back of the economy. “The icing on the cake for some buyers will be the upcoming stimulus payout, potentially boosting down payment availability for low down payment loans.”

Homebuying season already in full swing

Georges Benoliel, founder of real estate startup NestApple in New York City, can vouch for the current trend of early-bird purchasers.

“Prime homebuying season now starts in January instead of April. In Manhattan, there were over 1,000 contracts signed in January and also in February,” he says.

In the Windy City, the number of properties sold and the median sales price both went up by more than 15 percent in January, while the number of days on the market decreased by more than 16 percent, per the Chicago Association of Realtors.

“The spring buying market in Chicago is certainly getting an early start this year. There is pent-up demand from the pandemic lockdown that is lifting now that people are comfortable and confident enough to start a home search,” says Ben Creamer, co-founder and managing broker of Chicago-based Downtown Realty Co.

Statistics show a housing market on fire

Robust interest from buyers continues despite higher home prices and tighter supply. Nationwide, for the most recent week measured (through February 27), median listing prices increased 14 percent from a year earlier, marking the 29th straight week of double-digit price growth, according to the National Association of Realtors.

Other signs of a hot market:

  • New listings by sellers were 27 percent lower than a week earlier.
  • The inventory of homes for sale nationally in February dropped by 48.6 percent compared to 2020.
  • The supply of newly listed properties fell 24.5 percent countrywide and by 23.5 percent in large metros over the past year.
  • The median listing price rose to $353,000 in February, up 13.7 percent versus 2020, with large metros enjoying a price gain of 11.5 percent, on average, since last year.
  • The typical home stayed on the market for 70 days last month, 11 fewer days than one year earlier.

“The days on market have been very swift throughout winter, with no let-up,” Lawrence Yun, chief economist at the National Association of Realtors, says. “Though more inventory will show up in the spring months – around 20 percent above winter level – new sets of buyers will also emerge. Therefore, it will still feel like an overheated market with too many buyers chasing after too few homes.”

Home loans are another metric demonstrating how eager Americans are to buy residences. The Mortgage Bankers Association  revealed that mortgage applications for new home purchases grew a whopping 18.9 percent in January 2021 compared to one year earlier.

This week, mortgage applications dropped 1.3 percent from the week before, likely due to rising rates. The 30-year fixed mortgage rate inched up to 3.23 percent this week, according to Bankrate data. That’s an increase of 29 basis points since the beginning of 2021.

Despite these numbers, the MBA reported that overall activity in the purchase market was 2.4 percent higher than one year prior – its most robust showing in four weeks, with increases in both government and conventional loan applications.

Scarce inventory and ‘a mad dash’ to make offers

Jeremy Sopko, CEO of Independence, Ohio-based Nations Lending, says purchase applications at his lending firm since the beginning of the year have far outpaced 2020 and 2019 numbers.

“People are making a mad dash to try and take advantage of what are historically low interest rates. And, as rates have ticked up over the last couple of weeks, this has only fueled the fire,” Sopko says. “Second, you’ve got a pandemic-induced population shift. It’s no longer necessary for millions of people to live in or near large cities. No longer tied down to small apartments with high rents, they are free to explore elsewhere.”

Only time will tell if an early-onset spring market will become an annual trend.

“While it’s possible the pandemic may accelerate a shift in trends early to a new seasonal pattern, it’s also quite likely that, as life returns to normal, we’ll see the usual seasonal pattern return,” Kiefer says. “We’ll need to wait until at least next year to formulate an informed opinion.”

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