For being stuck in the worst global pandemic of modern-day history, the housing market has a lot going for it. In fact, you can hardly tell the economy is going through challenges by solely analyzing residential real estate or the mortgage industry.
Benton Capital tracks the latest weekly trends and wants you to stay informed. Making sense of this market takes clarity, which we provide below. Here are 10 reasons why COVID-19 hasn’t strangled the housing market:
- 1) Various local and state government-enforced shutdowns have driven people TO their homes, not out of them. Whether it’s an urban condominium, a house in the suburbs, or a rural property with land, the one place not off limits during the crisis point of the pandemic from March to May was a home. That doesn’t mean everything else is closed, as evidenced by limited and full re-openings of businesses and public places across the nation. However, besides being “where the heart is,” life-styling at home is where many people, quite literally, are spending much more of their time today.
- 2) Although employees may or may not enjoy working remote, the pandemic has put a premium on home office space for many workers — whether it’s make-shift space or a real office with walls. Working remote from home has accelerated an increasing remote-work trend already in play before COVID-19 impacted companies. For individuals who thrive on strolling down the hallway to their work space, this new luxury is top-of-mind for anyone look to purchase and move into a different house, or even those considering putting their house on the market.
- 3) The recent recession and job market slowdown happened because of mandated shutdowns that particularly hit places of public commerce and interaction (it’s not another “mortgage financial crisis”). It’s going to take some time for the economy to recover, but one thing is for certain: This isn’t a credit/borrower, underwriting and financial market crisis like the world experienced back in 2008. Are there issues affecting the financial markets? Yes. But the toxicity of 2008 that stemmed from bad banking and investments over bets on consumers and businesses just isn’t there.
- 4) Historically record-low interest rates on mortgages have created a home affordability cushion for many current homeowners, households looking to trade up, and first-time buyers. Using a mortgage to purchase or refinance a home has never been cheaper. A confluence of factors — most notably the high demand for mortgage bonds by investors and the Federal Reserve — has driven down the cost of borrowing money to unthinkable levels. This equates to immediate monthly savings for both homeowners and shoppers.
- 5) Manufacturers and small businesses that sell products and services to homebuilders, property developers, and infrastructure providers have been able to go back to work in most states, if not all. Some commodities are in shortage due to pandemic supply-chain and logistical issues. But for the most part, lumber mills, fabrication factories, material suppliers, contractor-trade servicers, home improvement retailers, and many others in the housing market pipeline have come back enough to support the housing industry in general. Some housing workers, contractors, sub-contractors, and entrepreneurs are still displaced by the economy, but that’s expected to steadily get better over the next several months.
- 6) Housing inventory was already tight heading into the COVID-19 crisis earlier this year, which means consumer demand to own a home still remains high. The U.S. market for homes hasn’t been “overbuilt” for more than a decade (not since 2008 – 2009), a time when many homebuilders put on the brakes to let the frothy market absorb new units coming on the grid. Some even went out of business. Since then, housing has mostly followed a slow, steady rebuilding and recovery path upward — to a point where some metropolitan regions were underbuilding over the past few years due to various reasons. That phenomenon, combined with higher consumer demand and steady household formation by Millennials, has equated to the demand for homes outpacing supply.
- 7) Although a historical number of homeowners have been affected by economic hardship due to the pandemic, the vast majority of homeowners are actually doing okay. “Okay” means their consumer sentiment and confidence is lower than before the pandemic, but their monthly finances/budgets are hanging in there to continue making steady mortgage payments. Some of these households are lower to moderate-income spouses or families, and others are middle to upper-middle income individuals. Whatever the case, total mortgage forbearance requests coming into mortgage servicers and lenders have dropped significantly compared to where experts predicted they might be by now. Also, households going from “forbearance” back to regular payments have increased more than expected.
- 8) The federal government’s emergency response to the economic fallout caused by COVID-19 has taken place at warp speed compared to historical reactions. In other times of economic crisis, it’s taken weeks or months for Congress and the Federal Reserve to react to the financial carnage suffered by consumers, workers and businesses. Not this time. Both entities responded within days through monetary policy actions (the Fed) and fiscal policy actions (Congress and the president). Additionally, agencies that regulate housing and lending acted almost instantaneously to grease the wheels of relief for millions of U.S. households.
- 9) Everyone in the real estate industry — realtors, mortgage companies, bankers, lending officers, inspectors, appraisers, and title/escrow officers — snapped to their feet with innovative solutions. In short, the entire industry adapted quickly, albeit some small bumps and hurdles. Whether it was contactless escrow closings, remote online notarizations, remote technology implementation, video showings, or utilizing digital technology for disclosures and paperwork, the entire chain of professionals reacted more positively than not to meet buyer and sellers’ demands, as well as government health requirements.
- 10) COVID-19 hit society after mobile homebuyer platforms and apps had already been experimented with and were tried and true (such as Redfin, Zillow, Trulia, and other online sites). Call it fate or perfect timing — but whatever you call it, this phenomenon assisted and cushioned buyer and sellers’ reactions to real estate when the pandemic came in full force.
For more context in today’s COVID-19 market, contact Benton Capital. And if you’re home shopper or current owner looking for the lowest mortgage rate in the marketplace today, start the conversation now!