Brad Berning, Zillow VP of Investor Relations joins to discuss 2021 housing market predictions.
AKIKO FUJITA: The price of US homes accelerated in October, as strong demand pushed home sales to a 14-year high. S&P CoreLogic Case-Shiller's Home Price Index posting an 8.4% gain. Zillow says the growth we've seen is just the beginning of a housing boom, and the online real estate platform forecasting annual home sales growth for next year to be the highest in nearly 40 years.
Let's bring in Brad Berning. He is VP of Investor Relations for Zillow. Brad, this is an interesting report. The headline that caught my attention here is how you talk about the return to cities. We have spent the last nine months or so talking about the huge exit out of major hubs like a New York or a San Francisco. It sounds like you think there could be a bit of a bounceback going into next year.
BRAD BERNING: Yeah, I think if you look at some of the data that we've published, there's actually not been quite the exodus that people think there have been. We've seen strong housing demand throughout the country. Now, San Francisco is an exception to that. And we've seen a little bit of inventory climb there. New York, a little bit of an exception. But the rest of the country, there's been strong housing demand in both the urban and suburban areas. So it's not been just a flight to the urban I think as some people have perceived a little bit.
And our economists, in talking about with a stronger economy in our forecast for next year, we've talked about that, you know, stronger job creation should be able to help out the rental market and help out the urban markets there as well. So I think the myth a little bit has exceeded itself.
ZACK GUZMAN: Yeah, Goldman Sachs also out kind of with the same thesis there, that the bounceback in some of these cities-- at least looking at the data there in New York-- would seem to show that other cities are far from dead as well. But when you look at other trends here in 2021, what might be the impact in terms of rising prices for those first-time home buyers? Obviously, mortgage rates are still low, but when you think on the margin, what's it going to look like for them?
BRAD BERNING: Yeah, I mean, housing demand has been incredibly strong. And so, you know, higher home prices certainly is an affordability issue for first-time home buyers, for the down payment side of it. Mortgage rates have been low. They're actually, in the last couple of weeks even, been at record lows, continuing to be low. The Federal Reserve is committed to trying to help keep rates low as we go into next year. And so, you know, interest rates and pricing might be a little bit of a headwind from that, but there's just such incredible demand.
And I think that's the thing-- you know, a lot of people have talked about the strong unit growth. We've seen strong price growth. But, actually, what really matters, I think, to measure demand, and what people aren't talking enough about is the total dollar volume of all of the homes that are being sold. That's actually, in the last three months, has grown between 39% and 40% for each of the last three months.
And so we expect that that demand is going to continue to carry over. We're seeing early precursors to data that's in December even here. Take the mortgage purchase applications out there, which is a leading indicator, that's up 26% year over year for a number of weeks now. And purchases that we've seen, pending transactions that will close at a later date, those have been up 18% even in some of the most recent weeks year over year, and so, again, a leading indicator to suggest that there's incredible demand out there.
And, you know, as we get to a safer environment, where there is a vaccine, we've seen in our surveys that there's a lot of sellers on the sidelines. And so they feel it's either unsafe or they feel that it's too much macro uncertainty for them, and they're waiting. And so we think better vaccine certainty will bring more sellers to market. What's important, though, is, people still need a place to live, so sellers aren't just sellers with inventory. They're also buyers. And so we see a lot of reasons that there's a continuous, you know, strong market ahead.
AKIKO FUJITA: From the buyer perspective, though, Brad, you could argue that record-low mortgage rates certainly contributing to the big demand, but, also, it's so much easier to buy a home. And you've talked about the digital-first experience. We've seen that accelerate throughout the pandemic-- a lot of homeowners who went out and just looked online and decided, I'm going to put my money down right there. How do you see that shifting going into next year? And how does that heat up the market even more, when there's so much accessibility there, if you've got the money to pay for it?
BRAD BERNING: Yeah, that's an incredibly important point. People have been talking about tight inventory for a number of months already, and, yet, we've seen transactions continue to grow. And why is that? It's because there is an increased ability to also be able to shop and search and find your home faster than you have been historically.
And so you can search on Zillow and find your house a lot quicker than going and driving around to three different open-houses weekends. Look, I've shopped many times for homes, and my wife and I have gone and looked at homes and shopped around, and now you can narrow that search online so much more efficiently, narrow it down to the one or two you actually want to go see. And the technology and agents have found ways to be incredibly helpful in the pandemic, are partners out there to work with customers on being able to find their homes quicker.
So we're seeing, you know, 16 days on market right now from when you list your home to when there's a pending contract. That's three weeks faster than a year ago. So that velocity of the home sale is incredibly fast and enabling people to be able to move even in a tight inventory type market. And so we expected that technology that has been adopted across many industries-- you've seen it, whether it's going to the movies and staying home to watch Netflix and whether it's buying a car online-- you know, people are starting to understand that our customer behaviors can be more efficient. We did it out of safety at first, obviously. But now that convenience we're seeing is being able to lead towards our expectations of how we want to live our lives going forward.
ZACK GUZMAN: And, Brad, too, I mean, when we talk about this, obviously, real estate's a very regional story at the same time. We've talked about Greenwich, Connecticut, being one of the hot markets here in 2020. I'm not sure if it's too early to look ahead to 2021, but a lot being made of a lot of people moving out of California, into Texas. Curious to see where you're seeing maybe some of the hot purchases here or hot home prices in some of these more regional markets across the US.
BRAD BERNING: Yeah, I mean, migration has been a trend even pre-pandemic. And so affordability has started to really matter. Taxes in different state jurisdictions have mattered. And so you're seeing businesses and you're seeing people make moves. And there's been a strong desire to move. We've always had customer surveys that have shown incredible customer interest in moving.
What we're seeing now is an increased ability to move. The remote work is giving people that option. So, yeah, you're seeing Greenwich, Connecticut. You're seeing different parts of-- whether it's Texas, Austin, Texas. You're seeing Phoenix. You're seeing different parts in Utah and Idaho. There's lots of places where people are coming out of these higher-cost jurisdictions and moving to where they can get lower cost both from a housing standpoint, cost-of-living standpoint, as well as taxes are part of the equation as well. And so we expect that those trends will only continue.
ZACK GUZMAN: All right. Brad Berning, Zillow VP of Investor Relations, appreciate that breakdown here. Be well. Thanks for chatting.
BRAD BERNING: Thank you.