LEXINGTON, Ky. – Pending home sales in May and June of 2020 have increased from 2019 in Fayette County, and the trend is expected to continue for at least the next few months.
Pending sales jumped 8 percent this past May, with 1,634 properties under contract, an all-time high, compared to 1,517 in 2019. Lexington-Bluegrass Association of Realtors (LBAR) CEO Justin Landon said the recent numbers are a positive sign for how the summer months could play out for the area’s real estate market.
“We had a severe case of lack of inventory going into the COVID-19 pandemic,” Landon said. “The pandemic did halt us from March 15 to the beginning of April in terms of people getting out and looking at houses. We predicted in March and April we would have a delayed spring market, so instead of having the major number of pending sales in March and April, we’re seeing that now in June and July, and I think it will continue through August and September.”
The volume of transactions under contract for May happened when inventory levels dropped to an all-time low with 2,439 available residential properties, a 34 percent decrease from 2019 and down 10 percent from April 2020. May’s inventory level marks the sixth consecutive month, starting in December of 2019, of record lows and rounds out the fourth-straight month of levels falling below the threshold of 3,000 available properties, Landon said.
“Right now we are having a hard time keeping things on the market because of a strong buyer pool,” he said. “Interest rates are still low, demand is high and inventory is low – that combination makes for a perfect storm of having a high rate of pending sales.”
LBAR President Greg Buchanan of ERA Select in Lexington said the real estate market is opening up as the economy does.
“It’s just taking longer for closings to happen, which is extending pending transactions and affecting sales volumes in the short term,” Buchanan said. “This tightening of inventory will also likely put pressure on Lexington and other counties in our region to have additional conversations about growth.”
Inventory levels in Central Kentucky have been trending lower than what is typically seen in the area, and that has been exacerbated by the ongoing pandemic, Landon said. Months of inventory fell to 2.1 in May, compared to 2.8 months in April and down 19 percent from the 2.6 months in 2019. Homes priced from $160,000-$200,000 had less than one month of inventory available across all LBAR counties. Fayette County, the county that generates the most transactions in LBAR’s jurisdiction, showed inventory levels hovering around two weeks or less for homes under $250,000. Madison County, the second most active county, had around two weeks of inventory for homes priced between $120,000-$200,000. A six-month supply of inventory is often considered a balanced market, Landon said.
A property's number of days on the market in May continued dropping for the year with a 13 percent decline, hitting 46 days compared to 53 days in 2019. That number dropped 4 percent from the previous month. Sixty-six percent of all home sales occurred in less than a month while only 13 percent of homes took longer than 120 days to sell in May.
“Interest rates are so favorable right now that buyers are out pounding the pavement trying to find available properties to purchase, but it’s tough to find anything that hasn’t already gone under contract,” Buchanan said. “Now is a great time, if you are thinking about selling, or in a place where you need to sell, to reach out to a realtor to explore options. Inventory is needed to meet buyer demand so sellers may find it very advantageous in the current market.”
Home prices have been pushed upward due to the increased demand, reaching a median of $193,000 in May, a 10 percent increase from the $176,200 median price from 2019. The median price in May of 2020 was the second-highest on record, following the all-time high in April and marking 15-straight months of gains. Nationally, home prices jumped a little more than 2 percent but hit a median of $284,600, much higher than the median price in Lexington. Across the country, home prices have now risen for 99 straight months.
Realtor Kassie Bennett of Kassie and Associates - Keller Williams Bluegrass has been selling real estate for 30 years, and for the past 15 years in Lexington and the surrounding areas.
“I am busier now than I have ever been,” Bennett said. “It seems as though soon as you put a sign in the yard you have multiple offers. Even the luxury homes and horse farms I have listed are selling quicker with fewer days on the market.”
Bennett attributes the market changes to interest rates being at an all-time low and to the idea that people seem to be spending more money in general.
“I spoke some employees at a local RV dealership, and their sales are up more than ever,” she said. “The Harley-Davidson dealership said what they have on the floor is all they have left and they’ve never seen anything like it.”
New construction sales continued to climb for the third straight month with year-over-year increases. May sales hit 125, a 17 percent increase from 2019’s 107 sales and 5 percent more sales than April. New construction made up nearly 11 percent of the market for the month.
“Late summer should see real estate sales pick up as closings return to normal and demand continues at a frenzied pace,” Buchanan said. “Record-low interest rates will also help spur buyers into action. As the market is dictating, most sellers who put their homes on the market continue to see quick sales and many are finding themselves in multiple offer situations.”
A home’s time on the market depends on the area in which it’s located and its price point, Landon said. Adding a home under $200,000 in Fayette County could get offers within hours of going on the market while homes at other price points and in other areas may not.
“Homes sold 43 percent faster in May when looking at the number of days on the market – 77 days in 2019 and 44 days in May 2020,” Landon said. “When you hear homes are selling like crazy, I like to caution people that a home selling in one-to-seven days sets some unrealistic expectations. Homes are selling super-fast, but most properties still take an average of 45 days to sell, and even that’s really fast. I just don’t want people to think it’s normal for a home to sell in a few days because that sets sellers and buyers up for disappointment.”
There were 15 percent fewer properties pending in April 2020 than in April 2019, but 8 percent more in May and 24 percent more in June in Fayette and surrounding counties.
“The delayed spring market is causing things to come back stronger,” Buchanan said. “We are seeing greater increases today compared to last year than we saw decreases two months ago. Fayette County has been a sellers’ market for some time now. Prices have increased as supply has tightened. The number of homes available on the market is down 40 percent year over year, which is an all-time low and the demand – I can’t say it’s at an all-time high – but it’s as high as it’s ever been. Kentucky is a great place to live and a lot of folks agree.”