US on the Cusp of a Whopping $2T in Annual Housing Sales

Driven by overall confidence in the market, more money is being spent on real estate than ever before.

More homes selling in more expensive markets is another driver.

Through the second quarter of 2021, the total value of residential real estate transactions was over $600 billion for the third time in the past year, for a total of $750 billion. This number has been steadily on the rise since 2010, but has recently taken a particularly sharp upswing. 

The combination of asset appreciation and relocation to expensive areas has already created over $1.25 trillion in transactions through the first half of 2021. Could 2021 be the first year that transactions surpass $2 trillion/? 

Prices are forecasted to slow, but not fall, and sales are generally expected to increase as supply shortages abate, so it most likely will, CoreLogic reported. 

However, with so much pressure on prices, it is likely that the difference between low- and high-priced houses will grow large enough that sales will eventually reorientate themselves to lower priced areas. 

“If that happens fast enough, we could end up with more sales and higher prices in the back half of 2021, but less money spent in total, because the transactions are happening in less expensive places,” according to CoreLogic.

Top Mark from Q3 2005 Eclipsed

Recent totals exceed the previous peak of $568 billion in Q3 2005.The value of transactions has skyrocketed, despite sales count, continuing a relatively normal growth trend.

Stan Ponte, Senior Global Real Estate Advisor and Associate Broker with Sotheby’s International Realty – East Side Manhattan Brokerage, tells GlobeSt, “Real Estate values are a direct result of confidence in the market. Especially in New York City which experienced such a pause in transactions during the early days of COVID-19, this approaching multi-trillion-dollar benchmark is the ultimate proof that we are back and better than ever.”

Sales are still below what they were during the 2000s boom. In Q2 2021, $1.91 million transactions were posted, substantially less than the $2.22 million transactions in Q3 2005.

The recent surge is due to an increase in prices. As of June 2021, the CoreLogic S&P Case-Shiller Index was valued 41% above its previous peak. However, this does not explain the surge in total sales value. Inflating 2005 prices to 2021 levels would still bring the current total to $680 billion. 

Why don’t the numbers line up? The answer lies in where homes are being sold now vs. 2005.

In the 2000s, around the time of the boom, lower-priced areas were overrepresented relative to higher-priced areas, reflecting the number in subprime mortgages at the time. During the past year, sales have moved to higher priced areas. 

This is most likely reflecting the move to less-dense areas, and more spacious homes that can facilitate home office work. The value of the real estate transactions is up not only because of prices, but also because sales have moved to more expensive areas.

People Reconsidering What They Want

Gregg Logan, Managing Director, RCLCO, tells GlobeSt that the drivers of this strong market demand are different than in past cycles.

“The Covid 19 pandemic made many people reconsider what they want in their home, with a desire for more space, better designed for working from home and living environments more consistent with their preferred lifestyle. It’s also important to note that we’re in the midst of substantial growth of households in their prime family formation years, which traditionally supports demand for homeownership,” he says. 

At the same time, “strong demand has reduced housing inventories in many high growth markets, further driving additional buyers to the market for fear of missing out as home prices continue to grow.”

Atlanta Market Booming

Christa Huffstickler, Founder & CEO of Engel & Völkers Atlanta, tells GlobeSt that with less than a month of single-family inventory in metro Atlanta, “the real estate pace here is unprecedented. 

“Demand is up and prices are pushing us nationally toward a record-setting year, which positions us moving into 2022 with a continued dearth of housing, and unable fill the void.

“The silver lining is that financing criteria has more or less maintained qualifying integrity so although prices are up and supply is down, low interest rates combined with buyers putting more money down is contributing to the strength of the responsible loans being generated.”

Atlanta has been and will continue to be one of the most attractive cities in the United States, especially for the younger generation just out of school and young families—which encourages the Boomer generation to follow as they want to be closer to grandchildren, Huffsticker said.

In Apartments, Demand Still Outweighs Supply

The multifamily housing industry is also part of the boom in residential transactions.

Kip Sowden, Chairman and Chief Executive Officer at RREAF Holdings, tells GlobeSt, “With residential real estate on track to be the first multi-trillion-dollar real estate market, the multifamily sector has consistently shown high occupancy rates and double-digit rent growths during the past 10 years.

“The Southeast and Sunbelt regions have been experiencing great population growth as people migrate to more business-friendly states with less federal regulations and lower costs of living. As more and more capital is shifted into the multifamily sector, we will continue to see positive trends and growth. In the foreseeable future, we do not see supply catching up to demand in many markets in which we transact.”

Sowden reports that RREAF has transacted more than $1.3 billion in trades, mostly acquisitions, in the past 12 months alone. “RREAF will continue to be very active, both in sales and acquisitions, as we deploy capital to the multifamily sector throughout 2022 and the foreseeable future. We will continue to endeavor to be net buyers of quality multifamily properties throughout the South and Southeast.”