A January 2020 study found that homeownership was a priority for 84 percent of U.S. citizens and residents. A reported 100 million Americans worked hard and planned to buy a house. But because the COVID-19 crisis was such an unexpected and unprecedented occurrence for the entire world, plans were definitely forced to change at the individual, national, and global levels as every area of society has been impacted by the virus. Here are some ways homeownership was affected during the rise of COVID-19 and the ensuing recession.
Buying a home became less of a priority.
Even before the pandemic took place, many U.S. citizens and residents already expressed that having low income prevented them from purchasing their own homes. This is not a surprising fact, especially since the cost of homes grew by more than 80 percent since 2012 and, in comparison, the income of potential buyers only grew by 24 percent. These were already dire and adverse conditions for homeownership. With a pandemic and a recession on top of these realities, more Americans would find buying their own homes less of a priority.
More U.S. residents are renting.
COVID-19 crisis also had a significant impact on rental behavior. The households applying for rental properties remained stable for half a year, leading to the shelter-in-place and quarantine mandates. However, because of stay-at-home orders, potential renters rose by 14 percent, which indicates that more Americans are competing to rent instead of buying their own homes.
It’s harder to ensure generational wealth.
Because more Americans are less likely to become homeowners for as long as the pandemic rages on, passing on generational wealth becomes difficult. Studies show that parents who own their houses also increase their kids’ likelihood of homeownership by 7-8 percent–a significantly impactful number when we consider that 4.75 million Americans might lose their houses because of the pandemic.
The crisis strengthened the already existing wealth gaps.
It goes to show that the pandemic and the recession will further strengthen and enforce the already existing traditional wealth gaps. The more financially capable will be scooping residential property inventory and renting out those homes to the individuals who were supposed to buy those houses for themselves.
The demand will recover, but the supply will remain low.
Fortunately, despite the massive drops in residential property sales due to the COVID-19 crisis, the real estate industry started to see an uptick in the late spring of 2020, which then approached pre-pandemic conditions by the summer. People who were eyeing residential properties started increasing their search and investment activity by the end of May.
Reports show that pending sales in metro areas, which decreased by more than 30 percent in April, saw the numbers rising by almost 30 percent when August came around—an increase over 2019’s sales during the same month. Thanks to physically-distanced viewings and virtual tours, potential buyers could expand their search, and home showings reached pre-pandemic levels around May.
However, despite the demand recovering, the housing supply and inventory continued to decline. In August of last year, there was less than 33 percent of the number of residential properties on the market in August 2019. There are plenty of reasons for this: Sellers might have a lot of health-related concerns and hesitations, as well as economic uncertainty.
Some Signs of Recovery or a Return to Normal
If you’re thinking of buying a new home this 2021, don’t let these uncertainties deter you from exploring. If there’s a property that you’ve already fallen in love with and it’s at a reasonable price and falls within your budget, you might be better off purchasing it now instead of waiting for a better property to come along.
Fannie Mae and Freddie Mac have reported that there will be further growth in home prices for both existing and new homes, with figures being higher than 2019 numbers. Don’t hesitate to consult companies that provide home mortgages and do thorough research on historical precedents concerning the rise and fall of interest rates.
However, the truth remains unchanged that no amount of forecasts, predictions, and projections can paint an exact image of what the real estate industry will look like this year. Even if interest and mortgage rates stay the same in 2021, they will still rise eventually. So, take this upcoming rise into account, and consult with professionals about your homeownership decision.