Home under contract

By: J. David Chapman/July 30, 2020

Last Thursday, I had a call from a couple relocating to the Oklahoma City metropolitan area. They wanted to go and view five homes on Sunday. They gave me the addresses and I entered them into the MLS and utilized a product called ShowingTime. I set up showings on all five properties. By Sunday, I had received messages from ShowingTime that all but one home had gone under contract. This is a regular occurring experience among residential real estate practitioners in Oklahoma right now.

Turns out this is a national trend. Numbers of home sales and home prices are at record highs. Sales of new single-family homes rose sharply for the second straight month in June, pushing the sales rate to its highest level in 13 years and 6.9% above a year earlier. Economists had predicted that it might take two years for new home sales to rise above January 2020 levels. That was before the coronavirus outbreak, and the market experienced significant changes. Housing is leading the recovery, fueled by low mortgage interest rates. Mortgage applications for home purchases hit 11-year highs this month.

I continue to be concerned about COVID-19-induced job losses; however, to date, those layoffs seem to be affecting younger renters rather than would-be homebuyers. The virus has affected hospitality jobs more than other workers. In these industries, the median employee age is 29 while the median U.S. homebuyer age is 47. In Oklahoma specifically, we are watching for declines in higher-priced properties in reaction to the ailing oil and gas industry. So far, so good.

So, what is creating this boom in residential real estate? Much of the gains are likely from pent-up demand and we are predicting the increases in both transactions and prices to last throughout the summer buying season. New homes have really seen an uptick in sales and prices. This is likely because of very low supply of existing homes for sale. However, another contribution is a changing consumer wish list. Homeowners have recently reconsidered amenities needed in their home after working from home for several months. These revelations include homes with pools, larger backyards, modern floor plans offering individual rooms for home offices, and studies for home schooling. Some are now also considering moving farther out from urban, metropolitan areas.

J. David Chapman is an associate professor of finance and real estate at the University of Central Oklahoma (jchapman7@uco.edu).