How COVID 19 impacted the 2020 housing market and what it means for buyers and sellers this year
Believe it or not, it’s been over a year since The World Health Organization declared COVID-19 a pandemic. Almost instantly, every sector in our economy felt the challenges a public health crisis brings with it.
Specifically speaking, the housing market slowed to an abrupt halt for much of March and April, only picking up in May, as growing concerns about buying and selling a home during the COVID crisis started to dissipate.
By the time July rolled around, more and more buyers and sellers entered the market and the Federal Reserve lowered interest rates to below 3%– the lowest the market had seen since the 1970s.
Despite the increased affordability factor brought on by ultra low interest rates, home buyers faced an inventory shortage like never before. And if you’re wondering as to whether or not this crazy competitive market was all brought on by the pandemic, the answer is yes and no. The COVID crisis simply exacerbated an already tight marketplace, making it even tricker for buyers to find homes.
So what does all of this mean for buyers and sellers going forward?
The pandemic forced people into making their home a live, work and play space, and now, as fear about the virus is dwindling, many are desperate to find homes that are more suited to their family’s growing needs. So now we’ve got an increased amount of activity in the housing market, coupled with low interest rates and inventory.
Simple economics tell us that when demand is high and supply is low, price must go up. As a result, home prices will remain elevated and well priced homes are likely to receive multiple offers.
We’re confident to predict that the market will remain a seller’s market for the rest of 2021, and likely even longer. The market may ease up a bit more in the fall and we may even see more inventory as the vaccine is rolled out to most Americans and more buyers and sellers feel comfortable entering the marketplace.
Interest rates will remain low for now, but will continue to creep up towards the end of the year, leveling out at or around 3.4%, experts predict. So if you’re hoping to catch rates lower than they are now, you’re likely to be disappointed.
How has the pandemic affected new construction?
Lack of new construction of single family homes is also partly to blame for the housing shortage– as the ability to find skilled laborers, shortage of affordable land and prices of building materials skyrocketed during COVID, and still remain high to this day.
To help meet demand, new builds are being significantly ramped up in 2021–already this year outpacing the number of new homes being built in the first few months of 2020.
Is this red hot market expected to create a housing crash?
Economists expect the economy to grow about 3 times as fast as normal this year. In more good news, they also predict employment to pickup as the job market opens up more in the coming months.
The hot housing market caused by the pandemic is nothing like what happened in the Great Recession; instead, it’s a simple supply and demand situation. As life slowly goes back to normal, the unbalanced market is likely to correct itself.
How can I be successful in this market as a buyer?
- Work with a Realtor
- Start your home search early
- Get pre-approved
- Shop for a mortgage locally
- Make a clean offer free of too many contingencies
- Going to remain a seller’s market all year
- Increased demand and low inventory means home prices will continue to rise
- Interest rates will steadily increase until they peak at about 3.4% at the end of the year
- This red hot housing market is not predicted to cause a housing crash
- Home buyers can still be successful in this housing market if they work with a Realtor and get pre-approved