Going into the 3rd year of the Coronavirus pandemic, many priorities have shifted. The landscape of the real estate market certainly looks different than it did at the end of 2019, causing both buyers and sellers to rethink their strategies. Many city dwellers fled their apartments to move back to their hometown, or at least somewhere less expensive. Now that there’s a vaccine, some of those same people are coming back to the city, only to find prices have changed, and the small town home prices are going up. These environmental shifts demanded people reevaluate if their home was feasible for everything it now needed to provide.
The trends of the housing market might seem hard to track, but there are a few key factors that are influencing decisions. Here’s a look at how and why COVID-19 is actively changing the face of real estate.
Mortgage Rates Dropped Dramatically
Buying a home started to look a lot more appealing in 2020 due to record low mortgage rates. 30-year-fixed mortgage rates were 2.5 percent at their lowest during the pandemic. For reference, rates were 3.625 percent in February of 2020. Rates rose back up in 2021 to 3.11 percent, which is still lower than before the pandemic. Those looking for a house or a vacation home saw an opportunity with these low rates that they might not have seen before, and consequently, home buying went up. Home sales in 2020 were the highest they’d been since 2006. Experts say, however, that as the economy rises, so will mortgage rates, so if you’re looking to buy a home, it’s best to act quickly, especially since housing prices are set to rise by as much as 11 percent in 2022.
New Cities Became “Hot Markets”
There are cities that are classically desirable–and expensive–to live in, like Los Angeles and New York City. During the pandemic, however, people left those cities because they were laid off or simply tired of paying high prices for homes in cities that were no longer bustling like they used to be. The amount of homes selling in big markets like San Francisco declined, while homes selling in nearby suburbs increased. Even cities that were considered affordable before — like Kansas City and Cleveland — suddenly had relatively high home prices. Homes were able to sell for more in these cities because of the growing demand for housing, and the pandemic dictating that so much of our lives happen inside the home, making the attractions outside the home not matter as much. According to Realtor.com, the top housing markets positioned for growth in 2022 are Salt Lake City, Utah, Boise City, Idaho and Spokane, Washington.
Technology Changed the Home Buying Process
Many of us have probably dream scrolled through Zillow before, favoriting homes we’d live in if we had the cash. During the pandemic, people went beyond favoriting, and pulled the trigger on homes they’d been eyeing online. Now, sites like Zillow are upping the ante and making it even simpler and easier to buy a home you’ve been looking at online. Listings are offering more virtual home and 3D tours. Appraisals can now be done remotely and all documents can be signed online, making escrow times shorter. With technology accelerating the home buying process, listings are on the market for as few as 17 days, as opposed to the 30 day average in previous years.
Supply Outpaced Demand
Because homes are being bought in record numbers, the amount of homes available has gone down.The current market has the lowest amount of homes available since the 1970s. Builders are seeing this as an opportunity to increase how many homes they’ll build in 2022. Projections say they’ll grow the housing supply by 1.65 million. This means the price of homes will continue to go up, as well as the price of rent, since so many people are looking for places to live, or new homes to purchase.
More From GOBankingRates