Key Highlights

  • According to com, median listing price in US +1.4% y/y for week ending May 9
  • Existing home sales in April down almost -18% but prices up +7.4% from one year ago
  • Meanwhile, 41.8M Americans have lost jobs in last ten weeks

It feels as though we’re living in some sort of Twilight Zone with home sale prices rising while unemployment rates are skyrocketing. According to, median list prices in the US were up +1.4% y/y during the week ending May 9 and existing home sale prices increased +7.4% y/y in April while the ranks of the unemployed hit 41.8M in May.

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What’s going on with this disconnect regarding rising home prices and rising employment numbers? Last time we had anything close to an economic crisis in 2008-2009, the housing market went into free fall.

What’s different today? The relationship between supply and demand

Before and during the financial crisis of 2008, dysfunctional lending practices that encouraged unqualified buyers to enter the market created excess demand for housing and homebuilders increased their home construction. When the financial system froze and workers lost their jobs, banks foreclosed on millions of houses, builders stopped building, buyers stopped buying and home prices sank.

Just over a decade later, most of the foreclosed houses have been bought up by investors, many fewer homebuilders have built many fewer houses, many more people became employed due to an ebullient economy and qualified buyers wanted and needed housing. Home prices soared while supply did not keep up with demand.

Then, BAM! The COVID-19 pandemic took hold and here we are with 41.8M workers unemployed, an economy at a standstill though slowly, slowly, slowly re-opening and housing supply and demand now in lockstep as new home listings have plummeted by as much as 80% y/y.

Now, both supply and demand have dropped…the drops are pretty much proportional to each other plus, according to Redfin, 41% of offers have been subject to bidding wars over the last month. Simultaneously, home sales have also dropped during the pandemic and it’s difficult for prices to more up or down when there are not as many comparable transactions to essentially make prices move.

Another factor to consider here, at least in the short term, is that the federal government has placed a moratorium on foreclosures on federally backed mortgages (Fannie, Freddie, etc.) and has directed the mortgage industry to offer mortgage forbearance for up to one year to homeowners negatively impacted by the pandemic. Having these mortgage protections for now in the short term will not lead to a supply spike (and with it, pressure to decrease prices) but all that may change if or when a foreclosure moratorium is lifted.

According to Skylar Olsen, Zillow economist, “We don’t expect prices to fall by too much (-2 to -3% through 2020), at least nothing like the last crisis because housing in general is much more resilient than it was last time (during the Great Recession.)”


Thanks to Curbed’s Jeff Andrews.

Also read: Podcast: Breaking News, SBA PPP Program | 12 Mortgage Forbearance, Consumer Confidence Rises Slightly, Podcast: Why Are You Thinking So Small? | The Power Of Thinking HUGE! | Tim and Julie Harris

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