The coronavirus pandemic devastated the U.S. economy, and the housing market was no exception. The lockdowns came just as the spring market was heating up, and buyer demand dropped to zero almost overnight. But while the national market has eased back up, with some markets even setting record-high home sale prices, some cities have continued to languish, with many of the hardest-hit markets still at a virtual standstill.
A new study by Clever Real Estate looks at market data to survey the 10 cities that have suffered the most damage from the pandemic. Are these markets just lagging behind the recovery, or could they be permanently depressed?
Taking Stock of an Uneven Market
To understand the health of these housing markets, the study used a metric that combines three main factors: median days on the market, the percentage of homes that sell within two weeks of being listed, and the contract ratio, which is the ratio of pending sales to total listings. Put them together, and you get an accurate snapshot of market demand.
In a normal year, the housing market begins to heat up at the beginning of spring, with the contract ratio increasing and the median days on the market falling as buyers come out and put in offers. This year was following that pattern until the pandemic set in at the beginning of March; almost overnight, buyer demand evaporated, and even renters were hit hard, too. The contract ratio took a nosedive, and sellers yanked their listings off the market.
But, so far at least, fears of a 2008-style bloodbath look to be unfounded. Just a few months later, the national market has rebounded to record levels. The percentage of houses that sell in less than two weeks has already risen to exceed 2019 numbers; for the week of June 15, those rapid sales were 34% higher than in the previous year. In some markets, like the hot Washington, D.C. area, prices are hitting record highs.
Still, there are some worrisome signs — the number of listings in 2020 is far lower than in 2019. While the houses that are on the market are selling briskly, there are many fewer houses on the market than usual. And the pandemic is a huge wild card; experts say that home prices in coronavirus epicenters such as Florida and Arizona will drop a whopping 6.6% by May 2021.
But in an era increasingly characterized by polarized inequality, it’s perhaps unsurprising that while some local markets – for example, west coast cities like San Diego – are booming, there are other markets that remain depressed.
In the top U.S. housing markets, median days on the market went from 66 days in April to 58 in June; in the depressed markets, however, median days on the market hasn’t recorded any improvement. Some of these cities have simply been hit by late waves of the pandemic, as the virus moves inland from the coasts. But others seem to show signs of a more worrisome kind of weakness — weakness that was exposed by the pandemic, not caused by it.
Worst-Hit Housing Markets By Coronavirus
Let’s look at the ten worst-hit housing markets in the U.S.
1. Tulsa, OK
Tulsa’s housing market has been hit harder than any other market in the U.S. and was the only market where all three metrics recorded significant decreases.
Between April and June, when the national market was pulling out of its nosedive, the percentage of Tulsa homes sold within two weeks plummeted by more than 50%. The contract ratio in Tulsa has also worsened by 80% since the middle of April, and homes are sitting on the market 31% longer in June compared to April.
Put it this way: Almost everything that could go wrong in the Tulsa housing market has gone wrong.
2. Salt Lake City, UT
After a banner year in 2019, Salt Lake City’s market has been devastated by the coronavirus — in fact, it’s the second hardest-hit market in the U.S. The percentage of homes that sold within two weeks of listing has declined by a staggering 57% between April and June, and the contract ratio has declined by just short of 80%. This is a market that’s come to a virtual standstill.
Interestingly, though, prices in Salt Lake City haven’t declined. In fact, median list prices went up nearly $30,000 between April and June, and fewer sellers are cutting their prices. This is great news for homeowners and sellers but probably isn’t sustainable if demand continues to wither.
3. Tucson, AZ
Tucson’s market was primed for a big year, with supply decreasing by over 25%, year over year. Normally, this buyer’s market would set the stage for rising prices, but the pandemic has destroyed demand in the market. After being hit with a mid-summer surge of coronavirus cases, Tucson homes are languishing on the market for 4 days longer than the previous average, which represents a 9% increase essentially overnight.
The Tucson market does have one notable quirk, though: Even as sales have fallen off a cliff, the percentage of homes that sold within two weeks has skyrocketed by over 150%. On top of that, median listing prices are up by over $10,000. Taken together, these trends suggest that, similar to the national market, the Tucson market has split into one segment that’s booming and thriving, and another that’s dead in the water.
4. Virginia Beach, VA
Median list prices in Virginia Beach are up $13,900 since the beginning of the pandemic, and the percentage of sellers willing to drop their asking price has declined by almost a quarter. More homes are selling faster, too, with a 55% increase in homes selling within two weeks of hitting the market. What’s the catch? Well, there just aren’t that many properties on the market in Virginia Beach; between March and mid-June, the percentage of listings that were yanked off the market shot up by 137%.
The upshot is that the properties on the market are selling well, but that the large majority of sellers in Virginia Beach have adopted a wait-and-see approach. Although the city is very attractive for its great affordability, a paralyzed market could scare off buyers.
5. Cincinnati, OH
Cincinnati is another unique case; the market has gone into an extreme slowdown while home values have shot up. In April, the median home value in Cincinnati sat at just over $180,000; by mid-June, it had exceeded $215,500.
At the same time, homes in Cincinnati are sitting on the market for 29 days longer than before the pandemic, and the percentage of homes that sell within two weeks has nosedived by almost 61%. When sales and listings edge up to normal levels, the Cincinnati market might be in for a correction.
6. Jacksonville, FL
Although the percentage of homes that sold within two weeks has increased by 12% in this mid-sized Florida city and median sale prices have edged up by 6%, year over year, the median days on market has almost doubled, increasing over 90%.
From this we can imply that, like a couple other cities on this list, the market has split into a booming, fast-selling segment, and a segment that’s essentially inert. Demand in the Jacksonville market has been sliding since early April, and while sale prices are up slightly, list prices are down; that hints at a further, and maybe protracted, decline in the near term.
7. Knoxville, TN
The Knoxville market is going in the wrong direction no matter how you look at it. The median listing price has declined by 9%, or more than $26,000, since April, the percentage of sellers dropping their price to attract buyers has increased, and the proportion of homes that sell within two weeks has declined almost 50%.
Demand here is low and trending even lower, which suggests a recovery could take a while.
8. Kansas City, MO
Sales in the Kansas City market have steeply declined since April, signaling both low inventory and low demand. Listing prices have gone up by an average of $28,416, but there’s been a nearly 11% increase in sellers cutting their prices.
Most worrisome of all, median days on market has increased by a shocking 40.3 days. This market is barely limping along.
9. Boise, ID
Boise’s market has plenty of bright spots — like a $45,000 increase in median listing price between April and June, with fewer sellers cutting their prices, even as demand has been on a steady decline.
But with demand looking to continue to decline, and an overall decrease in sales, the market here is looking soft.
10. Little Rock, AR
Little Rock was a lukewarm market even before the pandemic; now, it’s nearly ground to a halt. The percentage of homes that sold within two weeks has decreased by 30%, and median days on market is trending in the wrong direction, having increased by 5% already.
Demand in Little Rock was lower than the national average even before the pandemic; as Arkansas struggles with the coronavirus, that demand has almost bottomed out.