Why has the housing market been so resilient during the pandemic?
Even as the economy continues to be impacted by the effects of the pandemic, the housing market remains surprisingly resilient. On Wednesday, the National Association of Realtors said U.S. existing-home sales rose a record 21% in June.
Meanwhile, a survey from Realtor.com found more than one-third of homebuyers were more optimistic about buying a home after COVID-19, and nearly two-thirds of buyers said they believe shelter-in-place orders have helped them save money.
“The sales recovery is strong, as buyers were eager to purchase homes and properties that they had been eyeing during the shutdown,” said Lawrence Yun, NAR’s chief economist. “This revitalization looks to be sustainable for many months ahead as long as mortgage rates remain low and job gains continue.”
In Utah, preliminary data shows June sales up 12% and an increase in under-contract listings of 22%. Anecdotally, some Realtors are saying this summer’s housing activity is the most they’ve ever seen.
“While the health and economic impact has been significant, the U.S. housing market has remained surprisingly resilient, and consumers continue to view home ownership as the foundation of the American Dream,” said Realtor.com Senior Economist George Ratiu.
Here are some of the reasons why the housing market has remained strong:
Even before COVID-19 hit, there were not enough homes for would-be buyers. While some people have decided to wait to purchase a home because of the economic uncertainty, many others who have stable jobs are ready to make a move.
Demographics are also boosting the market with a large number of millennial buyers ready to purchase a home for the first time.
In some cases, the pandemic has created even more urgency to buy as people are spending much more time in their homes. The Realtor.com survey found that 41% of buyers are looking to buy a home sooner because of COVID-19.
In Utah, competition for homes remains high, especially since there are not enough houses for sale. As of July 20, active listings on UtahRealEstate.com were down 42% compared to last year.
Record-low mortgage rates
Record-low mortgage rates are boosting affordability for homebuyers. This week, the rate on a 30-year fixed mortgage averaged 3.01%, according to Freddie Mac. That’s compared to last year’s average of 3.75%.
That equates to significant savings for borrowers. For a $300,000 mortgage, that’s a savings of nearly $1,500 a year or nearly $45,000 over the life of the loan.
In fact, the Realtor.com survey found that three-quarters of buyers say the low mortgage rates are affecting their home search, with many looking for larger homes in nicer neighborhoods because of the low mortgage rates.
New housing priorities
With the pandemic’s focus on staying at home and working from home, buyers are more motivated than ever to purchase a house that meets their new needs.
“Home buyers remain steadfast in the main attributes they seek: three bedrooms, two bathrooms and a garage,” Ratiu said. “However, the quarantine has made people rethink where and why they want a new home.”
Some of those changes include wanting to move in faster. In fact, 84% of buyers are looking for a move-in ready home. That’s up 10% from March.
Buyers are also looking to stretch their budgets so they can live in larger homes. Thirty-eight percent say they’ve increased their price range since starting their home search.
More buyers are also expressing a willingness to live farther from their workplaces. Realtor.com found that 9% of consumers say they are willing to commute over an hour compared to the 3% who expressed willingness prior to the pandemic.
To learn more about how COVID-19 has affected the housing market in your area, contact a local Realtor. Find one at MyRealtorStory.com.