Realtor.com on Thursday released a new way to track the progress of the housing market amid the COVID-19 pandemic: The Housing Market Recovery Index.
The creation of the index was triggered by COVID-19 events that began in mid-March, said Javier Vivas, realtor.com’s director of economic research. It leverages proprietary measures developed over the past few years, he said. The index will be updated weekly for at least the remainder of the year.
“As housing and the overall U.S. economy emerge from near-term and mid-term disruptions, the real estate recovery will remain more local than ever,” Vivas said. “Our index will yield invaluable insights in predicting the nature and extent of the recovery, nationally and across the 50 largest metros in the country.”
The index is set to 100 for the last week of January. A value of 100 means the market has recovered to the pace seen that month, the company said.
In the U.S., the overall weekly index value is calculated as a weighted composite of four indexed components, including “housing demand,” based on realtor.com online search activity (10%); “home prices” based on median list prices (30%); “housing supply” based on new listings (30%); and “pace of sales” based on median time on market (30%).
The underlying data for the index comes from realtor.com’s online traffic activity and listings database, Vivas said.
In case you missed it, summer is the new homebuying season. The recovery index for the week ending June 6 shows that buyer interest and home prices are now growing faster than pre-COVID-19 levels. The Housing Market Recovery Index reached 88.8 nationwide, up one point over the previous week and 11.2 points below the January trend baseline, realtor.com said.
Two of the four index components, “housing demand” and “home prices,” are now moving above the January level, according to the report. The other two components, “new supply” and “pace of home sales,” remain below January’s baseline but both measures are now moving higher, realtor.com said.
The housing demand component reached 114 last week, down 5.7 points over the previous week but still above January’s baseline. The home price component also surpassed the recovery threshold, with this week’s index reaching 100.7, up 1.2 points over the prior week and 0.7 points above the January baseline.
“In contrast with the 2008 great recession, housing has the potential to play hero, not villain, this time around,” said Vivas.
Housing supply numbers came short in the report. Only seven out of 50 of the largest markets are seeing the new listings index surpass the January baseline.
Markets where new supply is improving the fastest tend to be higher priced than those that have yet recovered, the report said, suggesting sellers are becoming more confident and active in the more expensive markets.