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House prices rose to record highs during the coronavirus pandemic as buyers searched for space



NEW YORK – A tenant for most of her adult life, Clarence Swann became afraid that landlords would use the coronavirus as an excuse to gouge out their tenants. So in a desire to move close to his family, this retired veteran bought his first home last month at the age of 74.

Swann said he used his veteran status to get the loan needed to buy a $ 196,000 townhouse this summer in the Lake Wylie, South Carolina area.

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“The first need at my age is for stability,”

; he said.

Swann is among tens of thousands of buyers entering the housing market this spring and summer even as the coronavirus hits the US economy. According to an analysis of home price data by Associated Press and Core Logic, the presence of these buyers, coupled with a sharp drop in the number of homes in the market, has left home prices at record highs in most of the world all regions of the United States.

The median home price in the US in May rose 4.2% from a year ago. Data shows that cheaper housing prices – homes that are at a third of lower prices in urban areas and are typical targets for first-time buyers – are growing faster than the rest of the market, increasing 6.7% over a year ago.

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The coronavirus pandemic has helped shape the housing market by influencing everything from the direction of mortgage interest rates to the amount of inventory in the market to the type of house in need and the desired location.

The pandemic pushed the US economy into a deep recession because many businesses had to close, forcing the Federal Reserve to lower interest rates significantly. Average mortgage rates fell from about 3.75% at the beginning of the year to less than 3% in the weeks following the pandemic.

Economists say the sudden drop in mortgage rates is an immediate boon to home affordability, allowing more buyers to buy much more expensive homes while keeping payments intact. Monthly.

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Taylor Marr, senior economist at Redfin, said: “The 0.75 percentage point drop may not seem like much, but it’s like handing over $ 40,000 to someone who buys a home worth $ 475,000, people can get more homes with the same monthly payment ”.

The pandemic also caused sellers to delay bringing homes to market. Sellers, who are typically older than buyers, or worried about the economy, worried about their jobs, often don’t want strangers to enter their homes, or a mix of all three. The supply of homes available for sale in May fell nearly 30% from a year earlier.

The lack of foreclosure properties for sale is also a minor factor, as states and the federal government have imposed eviction and foreclosure policies.

“Both supply and demand are not stable. “My area’s supply is less than a month,” said Jay Rinehart, a real estate agent in the Charlotte metropolitan area, NC.

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Like most other industries, real estate ceased operations in March when the country’s governors ordered home purchases. But once those orders are lifted, the buyers intend to buy in 2020 before a pandemic hits the market again, brokers said.

An increase in home affordability may play a role in raising prices for homes that are just starting out or those that are priced at a lower third of the market.

In Washington, DC, real estate agent Sandy Shimono said most of the activity in the past three months was for homes between $ 400,000 and $ 650,000, in the expensive DC metro area considered homes. start.

“Many people get tired of renting and in the end affordability seems like an attainable goal,” Shimono said.

It is too early to tell whether an exodus from cities to the suburbs will last. Many employers have told employees expect to work remotely until early 2021, with some companies now talking about at least some work done remotely indefinitely.

The pandemic has also temporarily changed the type of home in need. Families are looking for homes with rooms, especially if children may be learning from distance in the near future.

Darin LaFramboise, 35, and his fiancé have plans to eventually move from mid-San Francisco to the suburbs once they have a family. But the pandemic forced the two to work remotely and schedule Zoom meetings around each other so they wouldn’t talk to each other. They hurry to look for a home.

“We liked being in the city center, but when the interest rates dropped to the same level, we started to seriously consider it,” he said.

At first, the couple went empty-handed – even lost to a property whose bid was $ 200,000 off the offer – but eventually found a three-bedroom home in Lafayette, California, on a half acre plot 55 minutes by train from downtown San Francisco, for $ 1.65 million.

“The city center (of Lafayette) reminds us a lot about where we lived in SF, and we have access to markets and restaurants just like we used to,” he said.

“Plus, we have the space!”

However, there are some threats to the housing market’s resilience.

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House prices are rising while the country is sinking in a deep economic recession. Many of the protections put in place in the early days of the pandemic are now ending – deportations are starting to return and foreclosures are likely to ensue. The unemployment boost has also expired, with unemployed workers remaining in the hope that Congress can reach an agreement to extend.

An analysis of mortgage data shows that about 7.5% of all active mortgages are still in some sort of ban scheme, according to financial data aggregator Black Knight. About 2.2 million 3-month bans will expire in September.

With less protections, and the certainty of a pandemic lasting for the remainder of the year, it is likely that thousands of homeowners could be delayed in payments and foreclosure. The spike in supply could bring down house prices in the second half of the year.

What’s more, recent buyers are mostly first-time homebuyers, who typically have lower incomes and are more vulnerable to economic fortunes than the rich.

“I think there is significant risk ahead, especially affecting buyers on the lower floors of the housing market, but perhaps more notably renters,” says Redfin’s Marr.


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