U.S. Home Prices Hit Record High as Supply Drops to All-Time Low

The U.S. housing market is defying seasonal norms, with the national median home sale price reaching a record $322,000 in early November—a 15% year-over-year increase. This surge is driven by a severe imbalance between high buyer demand and a historically low number of homes for sale. Active listings have fallen 29% from 2019 to an all-time low, creating a highly competitive environment where homes sell quickly and close to their asking price. For buyers and sellers navigating this unusual market, understanding these key trends is essential for making informed decisions.

Why Are Home Prices Rising in the Fall?

Typically, the national median home price peaks in early July and declines through the fall. However, in 2020, prices have increased by 7.3% since the four-week period ending July 5. Over the same period in 2018 and 2019, prices declined by an average of 4.2%. This atypical appreciation is primarily due to record-low mortgage rates and a fundamental shortage of inventory. The median home sale price is the middle value of all homes sold in a given period, meaning half of the homes sold for more and half for less than this figure. With the 30-year mortgage rate at 2.78% as of early November, purchasing power has increased, fueling demand amidst a shrinking supply of available properties.

How Competitive Is the Current Market for Buyers?

Market conditions are exceptionally competitive for homebuyers. Key metrics indicate a fast-paced environment:

• Speed of Sales: 44% of homes that went under contract had an accepted offer within the first two weeks on the market.
• Sale-to-List Price Ratio: This ratio, which measures how close homes are selling to their asking prices, rose to an all-time high of 99.5%. This means, on average, sellers are receiving offers extremely close to their initial list price.
• Pending Sales: Despite the seasonal slowdown, pending home sales were up 34% year over year.

Based on our experience assessment, buyers should be prepared to move quickly and make strong, clean offers to be successful in this climate.

What Does the Record-Low Inventory Mean for Sellers?

While the number of new listings was up 9% from a year earlier, the total number of active listings hit a new all-time low. This indicates that homes are selling faster than new ones are being listed. For sellers, this represents a significant opportunity. The high demand and low supply create a scenario where well-priced homes are likely to attract multiple offers quickly. However, some potential sellers may be hesitating due to broader economic uncertainty. As Redfin chief economist Daryl Fairweather noted, "Some sellers may be waiting until after the election results are certain before they list their homes."

What Is the Outlook for the Rest of 2020?

The market's trajectory for the remainder of the year will likely hinge on two factors: mortgage rates and listing activity. The Redfin Homebuyer Demand Index was up 31% from pre-pandemic levels in January and February. If mortgage rates remain near historic lows or decrease further, buyer demand is expected to stay strong. An increase in listing activity from hesitant sellers could help balance the market, but a significant surge in supply appears unlikely in the short term.

For buyers, the key advice is to get pre-approved and be ready to act decisively when a suitable property is found. For sellers, the current conditions are highly favorable for a successful and relatively quick sale, provided the home is priced competitively based on a professional assessment. The market has proven resilient, but its continued strength will depend on the evolving economic landscape.