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Why are home sales breaking these records during the COVID-19 pandemic and recession?

via USA Today

Home sales soared in July, continuing a stunning rebound buoyed in part by buyers seeking a more comfortable home in the midst of the coronavirus pandemic.  

Home sales jumped 24.7% from the month before, according to the National Association of Realtors. That surge broke the record for a month-to-month sales spike set in June when completed home purchases rose 20.7%. July sales rose 8.7% over the same month last year.

“Right now housing, amazingly, in the midst of a global pandemic  (and) high unemployment ... is in a booming phase,'' Lawrence Yun, NAR's chief economist, said in a briefing Friday.

But a significant segment of the country is being left out of the home buying rush because they can't afford to participate.    

"Unfortunately, home prices have also soared in the last year, a consequence of high demand, relatively low supply and low interest rates,'' Robert Frick, corporate economist for the Navy Federal Credit Union, said in a statement. "This puts homeownership further out of reach for lower-income Americans and even middle-income Americans in some markets. That lower-income Americans have been hurt more by the pandemic just makes that situation worse."

The number of homes available to buy was down. The 1.5 million houses, condos, and townhomes available for purchase in July was 21% lower than the housing inventory on the market one year earlier. That helped elevate prices. The national median price for a home topped $300,000 for the first time, reaching $304,100 -- an 8.5% jump over July 2019. 

Despite the higher price tags, many sellers are fielding multiple offers from buyers eager to take advantage of historically low interest rates that can shave hundreds of dollars off their mortgage payments.

Buyers on average are signing a contract to purchase a home 22 days after the property went on the market, the fastest turnaround ever, Yun said.

In some ways, the price spikes, bidding wars, and brisk sales reveal dueling sides of the coronavirus pandemic. While lower-wage earners, concentrated in hard-hit industries like retail and hospitality continue to struggle, higher-wage earners who are still employed are poised to take advantage of cheaper borrowing costs.

"The job losses are principally coming in the area of leisure and hospitality or retail sectors,'' Yun said. "Those are lower-paying occupations so they are not really in the home buying market ... The upper-income bracket,  they are more stable in terms of jobs, and they're trying to take advantage of these lower mortgage rates.’’

The pandemic may have also impacted the market because more professionals were able to work from home, cutting out the need to live close to the office and ramping up the desire for a larger, more comfortable space.

"Even as people go back to work, maybe it’s no longer five days a week,'' Yun said. "Commuting becomes much less important, so people can buy out in the suburbs.''

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