The residential real estate market has seen the effects brought on by the COVID-19 pandemic, and those with large shares of employment in sectors affected by the economic downturn were the hardest hit. Health and safety concerns accompanied by stay-at-home orders led to a decrease of both buyers looking to purchase homes and sellers listing their properties. But now that quarantines are relaxing across the country, how does one go about the process of getting their dream home and what does it say about the future of homeownership?
Opinions are Changing
In January 2020, 84% of Americans considered homeownership as a priority and 27 million Americans were looking to purchase a home within the next 12 months. About 100 million Americans have also considered buying and owning a home within the next five years. A year later, even millennials who initially would not have considered buying a home are now looking into homeownership. With most people working and learning remotely, living in the city no longer becomes a necessity, and more people are favoring stability in their living arrangements. In fact, homes in rural and suburban areas have even seen a rise in home sales.
Low Income is Still a Problem
However, interest and having the ability are two different things. Even before the pandemic, one of the biggest causes keeping non-homeowners from purchasing a home was low income. Income has grown only 24% among Americans aged 25 to 44 who were most likely to purchase houses for the first time, while the prices of homes soared 86%. In the first quarter of 2020, the median price of a starter home is $233,400. This means that you would have to possess $46,680 in order to pay off the recommended down payment of 20%. This does not even account for other costs like buying your furniture or maintenance costs.
With the current economic conditions accompanied by high unemployment rates and depleting savings used on rent, food, and other necessities, saving for a down payment does not seem like a priority to many households. Because of this, many Americans will struggle to cover the costs needed to attain homeownership.
How the Pandemic Affects the Real Estate Market
Despite the initial downturn of the housing sector in early 2020, existing home rates went up by 10.5% and new home sales shot up in August to the highest it has been since August 2006. A big portion of that demand was mostly led by younger buyers like millennials. However, the supply of existing homes is decreasing fast and is at an all-time low. This, accompanied by lower mortgage rates and stiff competition continue to drive the prices of housing up, which might make it harder for potential buyers to find their dream house. Sellers may also be reluctant to let potential buyers into their houses.
However, deciding to purchase a house despite the current situation has its advantages. Thanks to the advancements in technology, potential buyers can begin their initial home search online. Real estate businesses are also adapting to difficulties caused by the pandemic by going digital. Buyers can meet with real estate agents online through FaceTime and other video conferencing applications. Other agents are moving to different channels of communication like live-streaming and even YouTube to showcase properties to clients.
Not only that, but sellers are eager to make and close deals very quickly. More and more Americans are getting comfortable buying and selling homes online, with 43% of people saying they are more likely to sell online while the pandemic is still in motion. For buyers, there are still many who want to see a home in-person before committing, but 1 in 3 people would choose to see a home through a virtual or video tour rather than go in-person once the pandemic ends.
This sets the bar for what the future of real estate might look like. With already-existing apps to help potential buyers set up in-person appointments and help existing homeowners pay for rent, things are bound to get easier from here.
It’s a good time to consider how the pandemic has shaped the nature of work from home, and in these unprecedented times, the importance of considering your financial situation when making any large purchase is greater than ever. But, with interest rates hitting record lows, buyers can take advantage of excellent deals once they secure themselves a home loan.
If you feel financially secure and are willing to make concessions throughout your homeowner journey, with a little extra research and a lot of patience, it’s the perfect time to make that purchase and get your dream home.