As the U.S. starts to recover from the COVID-19 pandemic, the housing market remains volatile. It may take time to recover to its pre-COVID glory when there were plenty of homes to go around.
A year into an ongoing pandemic and the housing market is in a very different state than it was, as many things were previously. The COVID-19 pandemic affected every single industry in some way or another, and because of this, there are many different factors that put the housing market in its current state.
Though uncertainty still plagues everything that the pandemic has touched, there are a few predictions we can make right now about what a post-covid housing market looks like.
What Happened to the Housing Market During the COVID-19 Pandemic
To understand where the market is headed, we must first look at the problem and how exactly it was affected by COVID-19. To put it plainly, the demand for houses is high and the supply is alarmingly low.
Pre-pandemic, the home-building industry was already struggling to keep up the housing supply. Low inventory can be traced back to a decade of slower building rates than ever before.
Between the millennial generation aging to a point where they are pursuing homeownership and people looking to take advantage of historically low mortgage rates, the demand for housing was high.
Slow or paused material production during state-wide shut downs, combined with an increased demand for new building projects while everyone was quarantined at home resulted in the price of lumber skyrocketing. This supply cost increase can now be seen in the prices of new homes and felt by buyers everywhere.
Existing homeowners were also hesitant to sell during the pandemic for many reasons. Aside from health and safety concerns, sellers couldn’t be confident in selling their home when it wasn’t guaranteed that they could easily find another one. This only contributed to the problem of a dry housing supply.
Since last year at this same time, there has been a 53% decrease in housing supply. The demand for housing in a market of low inventory is causing housing costs to skyrocket and creating a sellers market. About 60% of households cannot afford a new home at the median price point, which has grown by 18.7% in the last year.
What to Expect in the Post-COVID Housing Market
Home sales will likely remain low this year as inventory remains an issue. Especially for the homes that are affordable to most buyers in the country. Current homeowners, however, are gaining equity as a result of their home values rising. This could potentially lead to a more hopeful looking market as those who gained equity during the pandemic may soon sell and look to upgrade.
Still, buyers should not be afraid to shop right now, as long as they’re prepared for a competitive market. It’s been reported that over half of the home offers written in January of this year resulted in bidding wars.
Buyers must be able to stay on their toes and be prepared to put together a winning offer. Things like making a cash offer or dropping certain contingencies can put you ahead of the crowd and win over the seller.
Competition in the market might not be the only thing you can expect as the effects of the pandemic linger.
If anything, the pandemic has pushed people to get creative and adapt safe ways to conduct their business. Realtors and lenders are likely to continue offering virtual accommodations, such as open houses, inspections, and document signings.
Bridge loans may become more common for lenders to offer. They’ll want to make their customers comfortable enough to close the deal and this type of loan allows the buyer to still purchase a new home, even while their current one is still waiting to be sold.
One of the most troubling aspects of the pandemic has been the rising delinquency rate as a result of job losses. 5% of homeowners in the U.S. are currently delinquent on their mortgage. And though federal forbearances have been in place for most of the pandemic, they’re currently set to expire in June 2021 which could spark another foreclosure crisis.
Some experts are hopeful, however, that these homeowners could avoid foreclosure by taking advantage of the seller’s market. With inventory already so low, vacant properties aren’t likely to stay on the market for long, which could help delinquent homeowners come out ahead on the deal.
As job rates begin to increase and the economy “opens back up,” mortgage rates may also rise gradually. It will be a wait-and-see situation to find out whether the increase in employment provides enough wealth for buyers to combat rising mortgage rates.
This could prevent first-time homebuyers from being able to find something affordable and stop current owners from looking to expand. Higher rates also mean less spending power for homeowners, which could also have an effect on the economy.
What Kind of Homes are People Expected to Buy
Homebuyers are now looking for homes that can serve every purpose. People will be looking for a place that can accommodate working from home, homeschooling, or even exercising. Ample outdoor space will also be popular as people look to entertain without having to worry about going out.
As far as where buyers are looking, they aren’t necessarily leaving cities but rather looking for single-family homes in that city, or moving to smaller cities where larger homes are more affordable. The bottom line is that people want space as they adjust to their new routines.
Houses with Updated Tech
Some buyers are looking for updated technology in their home that will support their health and wellness, such as advanced air and water filtration, antimicrobial countertops, and touchless faucets.
At the same time, if the market remains as competitive as it is currently, buyers may compromise and forgo many of their usual “must-haves,” so as not to risk losing their chance to buy.
The COVID-19 pandemic proved that people and industries can adapt, no matter the conditions. Potential buyers should remember that in the post-COVID housing market and not spend time waiting for the perfect time to buy.
Homefinity can discuss your best options for financing or refinancing in today’s market. Once you feel ready, our loan officers can guide you through the process and help you reach your financing needs.
If you’re still hesitant to buy or just looking for guidance, reach out to us to share your situation, and we’ll get you started on the right homebuying track.