Who would’ve thought our country would be in a recession in 2020? Covid-19 has undoubtedly impacted a variety of industries, however strangely enough, the housing market boomed.
Due to an accumulation of over $1 trillion in home equity and low housing supply, buyers are bidding up the prices of available properties, which has led to a soaring of home prices as well. This can be advantageous to new homeowners, however it’s unfortunate for those who are being shut out of the house market.
How will Covid-19 impact the housing market in the next few years?
Recent research has shown that in the next two decades, homeownership rates are predicted to decline. Among the most affected will be younger people and Black Americans. However, homeownership rates are expected to increase for millennials. All of these trends step from a history of failure to create housing for people who need it. This reduces the amount of potential homebuyers, and Covid-19 has negatively impacted all of these trends. To put it simply, the housing market might be booming, but so is inequality.
How has Covid-19 affected the demand for housing?
Across the board, housing prices are rising quickly. This is because the price on a home correlates to the supply and demand in the housing market. If there aren’t as many homes available, potential buyers will up their bidding to make sure they get one. If there aren’t many people looking for a home, the price will decrease because buyers will have less competitors. In addition, mortgage rates are dropping, and so is the cost of borrowing money. Right now, demand is high, and the fact that millennials are entering the homebuying years has a great deal to do with this. People who have been unsure about buying a home might have made the leap this past year. Alternatively, there’s also been a spike in people refinancing their mortgage for lower rates, rather than trying to find another home in a competitive market.
In a previous article, we discussed how homeowner preferences have changed amidst Covid-19. With remote working still prevalent, many homeowners have realized the need for extra office or outdoor space. And without having to commute, homeowners have more options to move to more suburban areas.
Supply of homes was already an issue before Covid-19, but Covid-19 certainly did not help the situation. Many are reluctant to move and risk financial instability in such uncertain times. Most homeowners are often reluctant to show their homes, and allow strangers into their homes during a pandemic. Virtual and self service home tours are the new norm.
In all, homeowners may have found themselves in a good spot last year, as they take advantage of lower mortgage rates. However for those looking to move, it takes a hefty chunk of change to take that leap — something many weren’t willing to risk in a pandemic.
We’re interested to see how the housing market will be affected by Covid-19 in the next few years, and we’ll be sure to keep you updated!
If you’re looking to refinance your home or need help navigating the mortgage process, Ken Venick is here for you. With over 30 years in the business, he can put you or your client in the right position to be successful in the housing market. Visit our FAQ page for more info, and contact us today.