How is COVID Affecting the Real Estate Market?

If you have been in the market to buy or sell your home, you know the market has been crazy. No one was quite sure how real estate would be affected by the pandemic when things opened up this spring. Sales for both existing and new homes hit their highest mark in August since 2006. Existing home sales are up 10.5% while new home sales are up 43.2% from a year ago.

Despite the record selling summer, experts don’t expect a lull this winter. Mortgage rates are still at an all time low encouraging buyers to purchase, in fact, mortgage applications are up 30% compared to a year ago.

Due to the current demand in real estate, this has caused home prices to reach an all time high. The national median home price was $310,600 in August which is up 11.4% from a year prior. The strong increase is partly due to a latent boom in the luxury market as well as a jump in multiple offers for starter homes. With multiple offers means there is only one winning buyer and several ‘losers’. Despite this, buyers are still pursuing homes to take advantage of the low interest rates.

So what does this new real estate boom mean for the future? Its hard to say. The demand for homes is currently outpacing the supply. Starter homes have increased significantly in price. With starter homes increasing, first time home buyers may be shut out of the market forcing people to rent. More supply of homes is critical in order to maintain equilibrium in the market. Otherwise we will see a large price gap in which only the wealthy can purchase. With people leaving the city, and more people working from home, this may spur new construction in more rural areas. Although, building in the current times is quite expensive due to the cost of supplies. Only time will tell what the future holds for the market. These are unprecedented times leaving us to make educated guesses as to what the next trend may entail.

What I can say is if you are in the market to buy or sell, it is still a great time to do so. As a buyer you will be able to take advantage of super low rates, and as a seller you will be able to take advantage of the premium prices. Don’t let the current trend scare you one way or another. There will always be some factor out there to deter you whether it be interest rates, prices, economy, or jobs. In the winter months, you will still be able to reap the benefits of low interest rates while facing less competition. And as a seller, there is limited supply and still lots of qualified buyers looking to purchase. So if the time is right for you, then go for it.

Reference:

The Double-Edged Housing Boom by Lawrence Yun (NAR Chief Economist)