COVID-19 Creates a New Type of Housing Boom
A remarkable 35% of renters have missed a rental payment between March and July because of the COVID-19 pandemic. Many renters are in low-wage jobs in service industries that were hit hard by closures enacted in order to slow the spread of the pandemic and make sure that hospitals were not overrun by sick people. While many millions of people are facing eviction as their rent is past-due, others find themselves in a much different situation. The COVID-19 pandemic has also caused a type of housing boom. Read on to learn more about what's behind this, who's looking for houses, what people want in a house now and what's going on with housing prices.
COVID-19 Changes Home Buyer Timelines
One of the biggest changes that the COVID-19 pandemic has caused is a change to home buyer timelines. In a large survey conducted by a national real estate firm, 25% of respondents said that their plan to buy a home now has a shorter timeline. Another 20% said that they plan to wait longer to buy a home because of the COVID-19 pandemic. Around 55% of respondents said that their plans or timeline haven't changed due to COVID-19.
What People Want in a House
Over the past six months, prospective home buyers' priorities in a home have also changed. Before the pandemic, people were increasingly looking at homes in walkable neighborhoods or close to work. With so many people teleworking, that's not as big of a concern now. Instead, people are asking their real estate agents to find them homes that offer a separate work space from living space. They're also looking for homes with bigger yards. Since so many vacations were cancelled, people are looking at "staycations" instead. Buyers also want more space. For many years, the sizes of homes were trending up, but over the past five years, smaller homes and even "tiny houses" became popular. On average, home buyers want 10% more space because of the COVID-19 pandemic. This makes sense for people who find themselves and their partner working from home. Families with kids who have to do remote learning also need separate spaces for the kids to do their remote school instruction.
Low Mortgage Rates Drive Demand
Mortgage rates have been low for a while. For a buyer with excellent credit, this means they can buy a bigger home for the same monthly payment. Low mortgage rates drive the demand for bigger homes as well as homes in outlying areas. Homes in exurban or suburban communities typically have larger yards, affording more outdoor living spaces and privacy from the neighbors. Buyers are also in a hurry to take advantage of these low rates. They want to buy now and lock in the rate before the Federal Reserve increases the cost of borrowing money.
Sales Increase Despite Record-high Unemployment
At the height of the layoffs and furloughs related to the COVID-19 pandemic, more than 30 million Americans filed for unemployment. This record number of unemployed adults who want to work is higher than during the Great Depression or Great Recession. Even so, pending home sales were up more than 12% for the year as of July. Not only are more people buying homes, but they're buying more expensive homes. Sales prices are up more than 11% this year compared to last year.
Decrease in Home Construction
Another issue in housing related to the COVID-19 pandemic is a decrease in home construction. Construction activities were halted for a month or two in many parts of the country. Supply chains continue to be disrupted, so essential materials used to build homes may be in short supply. If the pandemic worsens, so too could the rate of new construction and availability of raw materials.
Some Prospective Buyers Are Nervous
Scientists don't know which way the COVID-19 pandemic will go in the short-term. Many predict a worse second wave this autumn, coinciding with the annual return of influenza. Others claim that there could be an effective vaccine available by the end of the year. However, nobody knows what will happen. Buyers have a lot of worries about the uncertain future. Many fear that if the pandemic gets worse, states could enact more closures and shut down the economy like many of them did in March and April. Worries about an uncertain financial future are the leading reason why some buyers are holding off their purchase of a home.
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