Market Update for April 2020
With Brad O’Connor Ph.D.
TRT: 6m 36s
Video Transcription

Brad O’Connor directly addresses camera:  In March of this year, as Florida endured its first full month of the COVID-19 pandemic, we managed to squeeze out more closed sales of existing homes than we did in March of last year. But forward-looking indicators such as new pending sales strongly suggested that our luck would run out in April. Well, the April numbers from Florida Realtors are in, and they show that yes, April of 2020 will definitely be going down as a month we’d all like to forget. That said, there are still some positives we can take away from this month’s data, so let’s take a closer look.
In last month’s video, we noted that new pending sales in March were down about 23 percent year-over-year for single-family homes and down by 35 percent in the condo and townhouse category. As it turns out, these figures proved to be very much in line with what we saw for closings during April. In the single-family category, we experienced a 20.7 percent decline in closings this April compared to last year, which is the largest such decline we’ve seen in this category since October of 2010, when sales were down 21-and-a-half percent. The only other comparable month during that time span was September of 2017, when Hurricane Irma roared through the state, dropping closings by 20.4 percent, year-over-year.
As tough as those figures are to hear, they pale in comparison to April’s 36-and-a-half percent drop in condo and townhouse closings, for which there really are no comparable months over the 12-year span our data series covers. It’s also very much worth noting that while trends in Florida’s condo markets often differ widely across different parts of the state, the decline we saw here in April was actually quite broad-based.
All-cash sales, by the way, fell at a much faster pace than overall closed sales in April. Compared to April of last year, they were down by over 41 percent in the single-family category and nearly 50 percent in the condo and townhouse category. One of the simplest explanations for this trend is that many cash buyers typically sell off stocks to fund their home purchases, but with the stock market currently on the rocks, they are inclined to wait until they can recoup their losses before selling. Typically, the stock market will recover before the economy during a recession, but it remains to be seen whether the current rally we’re seeing in the market will be sustained long enough to get back to pre-COVID-19 levels. Buyers seeking to finance purchases through loans, on the other hand, are currently enjoying some of the lowest mortgage rates we’ve ever seen. This low-rate environment will certainly remain a primary driver of demand over the coming months even though lenders are tightening underwriting standards in the face of rising levels of risk.
Let’s move on now to discuss home prices, which in stark contrast to closed sales, did not appear to skip a beat at all in April.  The median sale price for closed sales of single-family homes came in at $275,000, an increase of 6 percent versus a year ago. Over in the condo and townhouse category, the median sale price was up 7.7 percent from last year, rising to $209,000. So this particular indicator is signaling that home values are generally holding firm, which, as we discussed in last month’s video, is really in line with what basic economic theory would predict when you have offsetting declines in both demand *and* supply. 
Looking ahead to May, all indications are that we will continue to see stable prices but will see a further decline in closed sales. New pending sales for April were down over 35 percent in the single-family category year-over-year, and they were down by almost 57 percent in the condo and townhouse category. Be that as it may, there’s a huge silver lining here, which is that the majority of this drop occurred in the first couple weeks of the month. 
In each week of the second half of April, we actually saw drastic improvement in the number of homes going under contract. The trajectory of this improvement has been strong enough, in fact, that the preliminary data we already have coming in for May actually point to the possibility that we could see positive year-over-year growth in new pending sales in several markets across the state in May—particularly for single-family homes. What’s more, there’s a lot of housing market data out there from around the country right now that is pointing toward this being a national trend. For example, over the past four weeks, the Mortgage Bankers Association has been reporting robust increases in the number of loan applications submitted for U.S. home purchases. So even though we still have to suffer through another month where closings are down significantly, the current trend in new pending sales is indicating that this may very well change beginning as of early June.
Before we go, it’s worth pointing out that another metric that showed improvement over the course of April was new listings. Overall for the month, new listings were down over 27 percent year-over-year in the single-family category, while new listings of condos and townhouses were down about 38-and-a-half percent. Again, though, like new pending sales, the pace of new listings was slowest in the first two weeks of the month, after which it started to recover. This recovery in the pace of new listings was not as strong as what we saw for new pending sales, though—so we appear to be, for now, in a situation where demand is rebounding a bit faster than supply. That’s good for prices in the short run, of course, but in the long run this could exacerbate the housing shortage even more, so we should keep an eye on how new listings fare through the end of May to see if they can catch up to the pace of sales.
So anyway, how’s your local market looking? Is there a pathway back to some sense of normalcy this summer? A great way to find out, of course, is to check out sunstats.floridarealtors.org, where members of Florida Realtors can drill down and access detailed data and customizable charts for their local markets. So be sure to head over to SunStats and give it a whirl if you haven’t tried it yet. Take care everyone—I’ll see you next month with hopefully some better news!