The coronavirus crisis hit residential real estate right before the start of its typically busy spring season—but one analyst says there are signs that the U.S. housing market could already be on the upswing.
Like nearly every facet of the U.S. economy, real estate took a hit from the spread of the coronavirus pandemic, with home purchase applications plunging and various market gauges, like the NAHB/Wells Fargo Housing Market Index and Fannie Mae’s Home Purchase Sentiment Index, hitting historically low levels.
While the market for buying and selling homes is far from normalcy—as of last week, the volume of weekly applications for a loan to purchase a home had improved week over week but was still down 20% on a year-over-year basis—the market is not without hopeful signs. An assortment of recently-released data from
Redfin
(ticker: RDFN) and
Zillow
(ZG) “suggest that the U.S. residential real estate market may be past the worst in terms of COVID-19 impact, and is starting to recover,” Tom White, senior research analyst at D.A. Davidson, wrote in a May 1 note. The analyst reaffirmed Buy ratings for Zillow, Redfin and
eXp
World Holdings (EXPI), all digital real estate companies.
White cites Redfin’s measure of home-buying demand as one promising sign. The seasonally-adjusted metric, which compares the number of daily homebuyer inquiries to the January and February average, dropped as low as 34% in March, but is now down only 15% for the week ending April 26, the analyst writes.
Redfin data also shows a slight increase in new listings and pending sales, White writes. The number of new homes hitting the market for the week ending April 24 rose to 53,000, up from 48,000 a week prior, White notes. Pending sales also rose, to 32,500 from 31,000. “We believe new listings and pending sales are still down significantly on a Y/Y basis,” White writes, noting that, while listings grew, “there were fewer than 700K homes for sale on Redfin.com across the US, marking a 5-year low.”
Some new homes may be coming from “buy-and-hold” investors, he adds. In an 8K filing, Redfin “cited their agents’ seeing Airbnb landlords with sudden unexpected vacancy putting their homes up for sale and landlords in college towns/cities deciding to list because the students who normally lease their units have headed home early,” White writes.
White additionally cites data from Zillow that shows that page views of for-sale listings on the website have rebounded in recent weeks. Mortgage applications have also ticked back up.
Listing prices have also been resilient, White says. The median listing price for U.S. homes increased 1% year over year as of April 24, the analyst writes, citing Redfin data. “We expect that the relatively low levels of for-sale home inventory in the U.S. (even pre-pandemic) to generally support home values this year unless the recovery/ re-opening of the U.S. economy fails to materialize or is overly protracted,” the report says.
Write to Shaina Mishkin at shaina.mishkin@dowjones.com
