The pandemic has caused a lot of stirs in the country and economy. It pushed the country to another crippling recession and boosted the housing market. It’s a curious case, to be honest. However, it can be explained in a few paragraphs.
The Pandemic Reduced The Number Of Buyers
Primarily, because of the pandemic, people stopped buying houses there’s no reason to. After all, the pandemic forced everyone to stay at home. It also caused unemployment. Even if cheap homes were up for grabs, not many could afford them, so the demand for homes plummeted considerably, and the prices went down because there was too much supply and no one’s buying.
The Pandemic Caused A Short-lived But Record-Breaking Low Mortgage Rates
In 2020, mortgage rates hit an all-time low. During that time, you could get a home with a mortgage rate of 2.7%. Pre-pandemic, mortgage rates were around 3.7%. And that’s a lot! Say that you bought a house that cost US$500,000. That single percent difference could have easily equated to roughly between US$70,000 and US$100,000, depending on your loan set up and the property.
The Pandemic Allowed High-Income Earners To Take Advantage Of The Housing Market
Of course, not all people were jobless during the pandemic. There was a small percentage of workers with high-paying jobs who continued earning as they could do their work at home. These high-income individuals took advantage of the housing market.
Even if they couldn’t see the home, as lockdowns were enforced, the pandemic didn’t deter them from deciding to buy. Homecorp says most of them only saw the properties through virtual tours.
The Pandemic Influenced The Type Of Property That’s On Demand
Regarding homebuyers’ choices, most preferred acquiring one in suburban locations. After all, there’s no use living in the city anymore, as the main benefits of being near work, restaurants, and other amenities a city could offer was relatively nil. And as they were stuck at home, they had chosen properties with bigger houses to dedicate some of the rooms as home offices for the working adults and study rooms for enrolled kids.
The Pandemic Halted The Finances Of Young Prime Homebuyers
Do note that the pandemic raged for more than two years. Home prices steadily declined as the country recovered from the health crisis. A year after, jobs were generated again, and the people regained a steady income. Most young adults during the pre-pandemic years were in their prime homebuying years and were willing to own property no matter how they could get it. However, it didn’t help that most of them were illiterate regarding real estate.
The Pandemic Resulted In Higher Housing Prices
The imbalance between supply and demand tilted during the end of the pandemic. As the high-income homebuyers started to obliterate the supply, the ones who were capable of buying a house during the post-peak phase were left with a few options. And this drove home prices up.
The Pandemic Shorted The Supply Even Further
And the market is now saturated with buyers, with little to no supply. Do note that even before the pandemic hit, there was already a shortage of houses. And this was caused by regulations and restrictions imposed on real estate developers. Instead of the regulated deficit, the pandemic caused a lack of supply that’s lower than before. On a side note, this only pushed more people to buy tiny houses.
The Pandemic Changed How People Think Of Homeownership
Owning a property nowadays has become a luxury. Currently, only 64.7% of Americans own a home, and it’s predicted to decline after a few years. The pandemic didn’t help with this front.
Because of the exorbitant housing prices, the housing market has been cordoned off from people with low purchasing power, barring them from easily owning a property. And this will become a massive issue as owning a property is one of the keystones of developing financial security and wealth building. Here’s one statistic: people who own homes have a net worth 80 times bigger than those who rent, on average.
Due to these reasons, homeownership has been mired with prestige. Some loathe it as it’s inaccessible to them.
In a nutshell, at the height of the pandemic, the supply of homes dwindled, which caused the prices to go up. And as it became more expensive to buy a property, most people would rather keep their property and not consider selling it. And with this, the number of properties on the market is at a standstill, while many aspiring homebuyers are still waiting for the one they can afford.