Housing Market Continues to Set Records Despite Ongoing COVID-19 Pandemic
Housing experts were predicting a dire freefall in the home market when the COVID-19 pandemic hit. Fortunately, those predictions have proven to be way off as the market has shown an extraordinary amount of resiliency. This resiliency is particularly impressive when looked at in context within the entire economic picture.
So what are the reasons for the strong housing market? Read on for more information about why the market continues to thrive and what are the latest figures.
Low Interest Rates
The number one reason that experts point to for being responsible for the thriving housing market is the continuation of low interest rates. Mortgage rates started their descent in the middle of March when the Federal Reserve announced that it would keep the credit flowing during the pandemic by purchasing mortgage bonds. Homebuyers have enjoyed average interest rates under 3% for 30-year fixed mortgages since late July. Just prior to the Fed's announcement in March, the interest rate had been hovering around 3.65%.
Boost in Affordability for Previous Renters
As more businesses have mandated employees to work from home, the landscape of housing affordability has also changed drastically. With this growing flexibility to work where it is convenient, more renters are given the opportunity to become homeowners. Rather than being beholden to live close to their place of work, renters have the freedom to move to places that may deliver more affordable housing.
For example, instead of living in downtown Chicago to be close to their workplace, a renter could move out to more rural areas in order to afford a starter home. As it is becoming clear that remote work is becoming a long-term option for many organizations, more and more renters are finding homeownership to be within their grasp.
Demand for Bigger and Better Houses
Once it became obvious that the pandemic would be forcing people to spend more time at home than ever before, families began to see their house as more than just a place to live. In today's challenging times, a home is also often an office, a school, and a place to entertain friends and family. Because of this realization, those that can afford to upgrade their homes are jumping at the chance to do so. This need for more space is fueling the housing market for both existing homes and new construction.
Latest Housing Numbers Paint Promising Picture
The blockbuster summer selling season is painting a hopeful picture for the overall housing market numbers this year. According to a report by the National Association of Realtors (NAR), existing-home sales increased 25% to reach a seasonally adjusted annual rate of 5.86 million during July. This jump marked the highest sales level since 2006.
In addition to record sales, the supply of homes on the market marked the lowest figures of any July on record. The NAR began tracking this data approximately 50 years ago. This data paints a definitive seller's market.
The current numbers continue to beat the expectations laid out by Lawrence Yun, chief economist of the NAR. During the onset of the pandemic, Yun had projected a 15% decline in home sales in 2020 as a result of the health and economic crisis. Following the aggressive actions of the Fed, Yun revised his prediction to land at an estimated 7% decline in sales. After a promising summer selling season, Yun's new projection is now estimating that sales of existing homes will gain 1.1% over last year. New house sales will rise a whopping 17% in 2020, according to Yun's predictions. While the spring buying season was a bust due to the pandemic, buyers are more than making up for it this summer and fall.
Nobody can predict what the housing market will look like years or even months down the road. However, it is hard not to be hopeful when you look at these figures and how the housing market has weathered this crisis so far. As more people continue to make their home their personal castle, economists are hopeful that the housing market will continue to resist the economic downturn.
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