By Steve Stevens, CCE, IOM
CEO, Kentucky REALTORS
FRANKFORT, Ky. — Doing business virtually became something new to many businesses in 2020 and certainly became more important than ever to other types of businesses. The virtual world, however, was always here for real estate and it has been helping people buy and sell properties for many years. The reason real estate transactions have not become even “more virtual,” is that real estate has been traditionally a “people business.” Most real estate professionals enjoy the face-to-face interaction they have with buyers and sellers. Relationships matter and trust is critical – especially when you are considering what will likely be the biggest and most important investment of your lifetime.
The challenge of the pandemic, however, has not been viewed entirely as a negative by the real estate industry. On the contrary, in many cases what we have experienced has been a tremendous opportunity to step back and look at all the ways in which real estate professionals do business and then make adjustments to fit our current circumstances in order to protect consumers and ourselves. These adjustments have yielded greater efficiencies and improvements to the business of real estate and many of the changes in business practices will assuredly last long after the pandemic is over.
REALTORS® have shown amazing adaptability and perseverance in the midst of the pandemic, from implementing safer office practices to how they conduct property showings to completing transactions at closings. Make no mistake, there have been obstacles to overcome. For a time, government buildings were not accessible to the public and thus, it became a struggle in some counties to obtain real estate documents necessary to complete transactions. Fortunately, real estate was deemed an essential business throughout the pandemic. Our state and local governments provided us the support we needed to continue to do business.
What has happened in the real estate market this year is nothing short of remarkable, as much as it has also been a blessing to our state and national economies. As was the case in previous recessionary periods, when other industry sectors struggled in a slowing economy, real estate as a sector has occupied an increasingly larger share of the total GDP and State Domestic Product to help pull the economy along. Take a look at real estate’s “record-setting” performance in 2020 (as of November’s close):
Kentucky’s total residential real estate volume still with one month to go in 2020 has exceeded an all-time high at $11.5 billion. The previous high was in 2019 at $9.8 billion.
Closed listings in Kentucky as of the end of November 2020 were 51,431. The previous high was 48,659 in 2017.
The downside of the equation is that increasing demand also causes increasing home prices and smaller inventory:
• The average home price in Kentucky in 2020 stands at $223,781, up from 2019’s high of $200,258.
• The median home price in 2020 is $154,401. For the Southern region of the U.S., the median price is $270K.
• Kentucky’s housing inventory has dropped from 4.85 months of stock in 2016 to just 2.51 months in 2020.
• Nationally, inventory is at 2.3 months.
• Homes stayed on the market in Kentucky an average of 103.8 days, down from 133 days just 5 years ago.
• Real estate will continue to be an important component of Kentucky’s and the U.S. economy in 2021.
It is expected to continue its strong run on into the new year, primarily driven by record low interest rates that should stay around 3%. It will be a seller’s market, yet if you can find a home to buy, you can cash in on low mortgage rates that will help soften the blow of rising home prices.
Steve Stevens is CEO of Kentucky REALTORS® which has more than 12,000 members in Kentucky.