No Bargains in Sight as Home Prices Show Little Impact from Coronavirus

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  • The median sale price was up 4.6% year-over-year in May, to $263,408.
  • Most major metros saw a slight deceleration in sale price growth from April to May
  • A resurgence of more-expensive listings, low price cuts, and record-low days on market are all expected to sustain upward pressure on sales prices.

The median price of U.S. homes sold in May was $263,408, up 4.6% year-over-year. But May was also the second straight month in which annual growth was slower than the month prior — definitively snapping an almost year-long period of continuous acceleration that began in April 2019 and peaked in March at 5.5%.

Annual growth in median sale price was slower in May than in April in 31 of the nation’s 50 largest metros, though the deceleration was generally small. The biggest slowdown was in Providence, down 2 percentage points in May from April (from almost 9.2% to just slightly more than 7.1%). San Jose was at the opposite end — annual growth in the heart of Silicon Valley was 2.1 percentage points faster in May than in April (to 5.3% from 3.2%).

The data make clear that despite the nationwide shockwaves generated by the coronavirus pandemic, home prices haven’t been hit to the same degree as other sectors of the economy — at least for now. And because closed sales obviously lag active listings, we can expect sales prices to reflect the relative stability and growth of median list prices that we’ve seen over the past few months. Sale prices increased year-over-year in May in all 50 of the nation’s largest metros.

Still, the pandemic has had a small but noticeable impact on prices. In mid-April, inventory of available homes to buy hit its low-point as stay-at-home orders temporarily paused home transaction activity. Initially, listings of the most-expensive homes fell the most, skewing the distribution of homes actually available for sale toward those in lower price ranges. It’s likely we’re seeing the impact of the closed sales of those lower-priced homes reflected in May’s deceleration in the median sale price.

Recent data point to continued stability in sales prices. By early June, as inventory recovered from April lows, listings at more expensive price points surged back to levels close to last year’s, while lower-priced listings remained depressed. Sellers are also consistently holding firm on their asking prices — just 4.1% of active listings in the last week of June had undergone a price cut, compared to 5.6% of listings a year earlier. And with homes typically selling just 20 days after hitting the market — the lowest level ever recorded by Zillow — sellers have little incentive to slash prices. All of these upward pressures on list prices will likely carry through to sales prices in the coming months.

As spring turns to summer, buyers currently in the market and expecting to score a bargain from desperate sellers may be in for a rude surprise. Zillow listing metrics clearly point to the fact that, despite challenges posed by the pandemic, it remains a very competitive homebuying season — ever-low inventory is no match for buyers’ pent-up demand. Steady sales prices are a final confirmation of this trend.

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