While you might think the opposite would have occurred, after the COVID-19 hit, leaving millions of Americans out of work, the housing market continued to boom. In fact, between September 2019 and September 2021, a collective trillion dollars was accumulated by homeowners in additional home equity.
The reason behind that is the historically low housing supply leading buyers to bid desperately, raising the prices of available homes. Due to that, homeownership has changed and is continuing to change since the advent of the pandemic in a number of ways.
Homeownership Rates Will Continue to Decline
Homeownership rates have declined with every generation since the Baby Boomers. It’s been estimated that the rate will decline by another 3 percentage points to 62 percent by 2040, with the greatest losses among younger people and Black Americans. Younger Millennials will have a homeownership rate of 64 percent, whereas the Boomers had a 72 percent homeownership rate at their age.
Not building enough homes for those who need them, the tightening of credit that’s reduced the number of potential buyers, and the effects of the pandemic of all exacerbated this trend.
Rising Home Prices
Home prices have been skyrocketing. In November 2020, they rose 9.5 percent from November 2019, according to the S&P CoreLogic Case-Shiller National Home Price NSA Index, which tracks price changes of single-family homes.
While buying a home is almost always stressful, the steps to buy a house have become even more challenging now. With fewer homes available for sale, prospective buyers have been bidding up the price in order to get one. Bidding wars have become common in hot markets, with home prices tied to supply and demand, and COVID-19 has affected both.
In January of 2021, mortgage rates hit an all-time low of 2.65 percent. While they were climbing again, the new omicron variant of the coronavirus caused the average rate to dip from 3.24 percent to 3.2 percent on a 30-year mortgage, Bankrate reported on December 1, 2021.
Fall mortgage rates mean the cost of borrowing money to purchase a home is falling, and by tens of thousands of dollars over the life of a mortgage. That’s trigging much of the demand with the biggest generation, Millennials, now in their prime homebuying years. Those who can take advantage of the low-interest rates are doing so, creating an even greater demand for homes.
More People Are Moving to Suburban and Rural Environments
During the pandemic, many people began working remotely from home for the first time. With both employers and employees discovering the benefits of remote work options, many have been making moves farther out of the city instead of returning to the office.
There’s been a big reshuffle, with small towns that were once too far to commute from attracting lots of remote workers. Those workers are purchasing homes at higher and higher prices, driving up housing costs in places that were once affordable. Even before the pandemic, there was a home shortage as the lowest number of homes were built from 2010 through 2019 than any decade since the 1960s. The rise of COVID-10 has significantly worsened the problem.