By Nicole Friedman
The pandemic is revving up the market for expensive homes where many people are spending far more time, luring richer buyers and nudging more sales over the half-million dollar mark from northern California to the New York City suburbs.
Nearly one in four home buyers between April and June bought houses priced at $500,000 or more, up from 14% of buyers during the preceding nine months, according to a Wednesday report from the National Association of Realtors.
Home buyers during the coronavirus pandemic had a median household income of $110,800, compared with $94,400 for pre-pandemic buyers, the survey showed.
"The buyers who purchase during Covid[-19] want a larger home," said Jessica Lautz, vice president of demographics and behavioral insights at NAR. "There's certainly more homes being purchased that are expensive."
The pandemic has caused the economy to sputter and businesses to close, a condition usually associated with slower home sales and lower home prices. But white collar professionals have largely avoided the worst of the downturn. Many of those who can work remotely are seeking a bigger house with more outdoor space or are buying vacation homes.
The surging demand that is pushing up home prices is also making homeownership harder to attain for lower-wage workers and for some younger buyers. First-time buyers made up 31% of all primary-home buyers in the year ended in June, down from 33% the year before and the historical norm of 40%, NAR said.
Pandemic buyers were less likely to have been denied by a mortgage lender, and many new homeowners rushed to lock in record-low mortgage rates. But the higher home prices wiped away some of that benefit, analysts say. The median purchase price for pandemic buyers jumped 26% compared with pre-pandemic purchases to $339,400, according to the survey.
NAR polled more than 8,000 people who bought primary homes in the year ended in June, though recent home sales data suggests these trends have continued since then.
Home sales had been relatively stagnant for several years heading into 2020. Then low interest rates and strong employment pushed existing-home sales to a 13-year high in February.
Shelter-in-place restrictions, financial uncertainty and fears of Covid-19 infection dampened the market during much of the spring. Home sales dropped for three straight months, hitting a 10-year low in May. The resurgence that followed surprised economists and real-estate brokers who failed to anticipate that the pandemic would spur so much new demand from buyers.
Economists at NAR forecast existing-home sales to total 5.4 million this year before jumping to 5.86 million next year, which would be the highest level since 2006.
Sacramento was the most popular destination with buyers shopping outside their own metro area in the third quarter, according to real-estate brokerage Redfin Corp.
Employees at tech companies in the Bay Area who can now permanently work from home are drawn to Sacramento for its relative affordability, said Wendy Kay, a Coldwell Banker agent.
The median Sacramento home-sale price rose 12.8% in the week ended Sept. 19 from a year earlier, according to Zillow Group Inc. Ms. Kay recently sold a two-bedroom house for $750,000. "It's insane," she said. "But apparently it's still cheaper than the areas that they're coming from."
Home sales in Greenwich, Conn., are also booming as New York City residents shop for primary or second homes in the suburbs, said Jack Sarsen of Compass. Bidding wars and all-cash buyers have become more common.
"The mortgage buyers that we've worked with have really unfortunately been cut out of the deal in many cases on the homes that they've wanted, " he said.
The Boise, Idaho, metro area has experienced some of the fastest home-price growth in recent months. Steve and Michelle Klock, both 53 years old, bought their first home in Meridian, Idaho, in October. They got outbid multiple times before landing a three-bedroom house for $310,000.
"In a market like this, the only thing you can feel right now is fortunate," Mr. Klock said. "If you don't get in, every day that you sit on the sideline you could be losing as much as $5,000 a week" as prices rise, he said.
Write to Nicole Friedman at nicole.friedman@wsj.com
(END) Dow Jones Newswires
11-11-20 1014ET
