2020 was a year like no other for the residential real estate market, and the market is still feeling the effects. The onset of the COVID-19 pandemic in the late winter and early spring of last year set off a series of whiplashing shifts. Initially, public health concerns and stay-at-home orders brought the market to a halt as buyers and sellers alike held back on transactions. But over the course of the year, demand rebounded in dramatic fashion. Increased household savings gave many people more resources to enter the market, especially among first-time buyers in the millennial generation. Meanwhile, space and amenities in the home took on additional value because more people were working and schooling from home. All of these factors have driven up the demand for homes.
Despite strong interest from buyers, the market has not seen supply keep up. The ripple effects of the pandemic have made many would-be sellers more conservative, keeping their homes off the market. With the broader economic outlook still uncertain in many ways, these homeowners are wary of making such a major transaction, especially when it means competing with a mass of buyers for their next property.
Together, the combination of strong demand and weak supply has produced higher prices and lower inventory. In a typical year, the number of active listings and the median list price for homes stay roughly in sync, following the seasonality of the real estate market. In 2020, however, there was a divergence as prices continued to increase while active listings fell sharply over the course of the year.
Another side effect of this dynamic is that the homes that do come on the market sell faster because of the scarcity. In turn, this means that the share of listings on the market that are new in any given month is rising. At the peak of the summer market in 2020, the share of listings that were newly listed within the past 30 days was almost half of total inventory. Even for the slower periods in November and December 2020, the share of new listings was up 50 percent or more year-over-year for the same months—and comparable to the level for peak months in a normal year.
As is usually the case with real estate, these trends look different according to location. Many of the areas that still have a strong housing inventory are places that have seen increased home construction to accommodate a growing population. At the state level, Florida is the clear leader in the number of homes for sale, with 248 active listings per 10,000 homes, and Hawaii (229) and Georgia (210) are not far behind. In these locations, supply and demand are keeping pace with one another more than they are elsewhere. This makes them more favorable for buyers, because while there are more competitors in the market, there are also more options available.