New Home SalesCENSUS
822K
U.S. Housing Market · 2020 · NBER recession
U.S. Housing Market in 2020
pandemicremote work boomrates to 3%
Existing SalesNAR
5.64M
Median PriceNAR
$295,300
30Y MortgagePMMS
3.11%
2020 was the year the pandemic broke the U.S. housing market in two: existing inventory froze, but new-home sales surged to 822,000 — the highest reading since 2006.
The Federal Reserve cut the federal funds rate to zero in March, and 30-year mortgage rates fell to 3.11% by year-end — the lowest annual average in the 50-year PMMS series at that point. Remote work created new demand for larger suburban homes. Existing-home sales reached 5.64M despite the inventory freeze; prices jumped 9.4% YoY to a median of $295,300. The 2021 print would prove even more dramatic.
Macroeconomic Context
COVID-19 transformed 2020 into an economic catastrophe and then, paradoxically for housing, into a historic boom year. The pandemic reached the United States in February; by mid-March, most of the country was under stay-at-home orders. GDP collapsed at a 31.4 percent annualized rate in the second quarter — the steepest single-quarter decline since the government began quarterly record-keeping. Unemployment reached 14.7 percent in April, the highest monthly reading since the Great Depression. Congress responded with the $2.2 trillion CARES Act — including $1,200 direct payments, enhanced unemployment benefits, and small business loans — while the Federal Reserve cut rates to zero in March and launched unlimited asset purchases.
The full-year GDP contraction was approximately 3.4 percent — the worst annual performance since World War II. Consumer price inflation was 1.2 percent for the year, held down by the energy price collapse in the spring (oil briefly traded at negative prices in April) and demand destruction.
Yet housing defied every recession precedent. Remote work dissolved the relationship between where people worked and where they needed to live, triggering an exodus from expensive urban cores to suburbs, exurbs, and secondary cities. Demand for single-family homes with extra space surged precisely as the Fed suppressed mortgage rates to record lows: the 30-year fixed fell to a historic low of 2.65 percent in January 2021, with rates below 3 percent prevailing through most of the second half of 2020. Existing-home sales accelerated through the fall to their fastest pace since 2006. Bidding wars became routine in formerly sleepy markets. The pandemic housing boom had ignited.