Flattening Home Prices Indicate Market Comeback

In April, home contracts and listings took a deep dive, but things are looking up as the industry moves forward. The largest drop between March and April is looking to become a thing of the past with contract and permit applications working their way up. Home sales fell 30.8% from a year ago in May, according to Redfin, with the most expensive metro areas seeing an even more startling decrease than the national average. But from April to May alone, contracts jumped 33%, a key for predicting trends for the remainder of the year.

The housing market showed some early signs of recovery in May as the addition of homes for sale and contracts to buy homes both increased dramatically from April levels, but the market remains overall very competitive thanks to a continuing shortage of homes for sale. U.S. home-sale prices increased just 0.5% year over year in May to a median of $299,400 across the 217 metros Redfin tracks. This was the smallest annual increase since home prices bottomed out in February 2012. However, the fact that this increase was so much smaller than the 4.7% gain in April was largely due to fewer homes being sold in the most expensive metro areas.

Overall home sales in May fell 30.8% from a year ago, but the most expensive metro areas all saw more dramatic decreases in home sales than the national drop. The 12 metro areas with median prices above $450,000 (seven of which are in California) all saw home sales decline between 38% and 58% from a year earlier. San Francisco and San Jose, which both have median prices above $1 million, each saw home sales drop more than 55%.

“Although the housing market was still mostly stalled in May, it’s worth noting that homes under contract to be sold jumped 33% between April and May after two consecutive months of decline,” said Redfin lead economist Taylor Marr. “This is a key leading indicator for home sales in June and July. New listings of homes for sale have also likely passed their bottom, but are still about 20% below February’s level, so there’s still a ways to go before the housing market has recouped the lost activity of the past few months during the shutdowns.”

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