How Did The Coronavirus Effect The Housing Market?
The coronavirus has changed the world in a lot of elements. One of which is the housing market. What's going on in this volatile market?
Covid ran rampant for two years, and in the most case is still free among the population of the world. Of course thanks to science and the work of many resilient individuals in the health field we managed to stop what could of been ten times worse.
Even know we banded together to stop it (mostly), millions of people where effected, families ruined, business shut down, and industries changed forever. That brings us to the question.
What happened to the real estate market?
Before we jump into the after-effects lets take a look at what the hosing market was like before COVID hit to better understand what happened after.
Calm Before The Strom. Pre-Covid Market
Buyer Exhaustion: Towards the end of the year as things started to show signs of getting worse in Europe. There was heavy buyer exhaustion and a sales volume decline. This can also be tied out to a shortage of supply.
A Rise Of Homeowners: In 2019 there was also a steep and sudden rise of homeowners. And it kept raising even with a median income from families rose from a low to a high of 4.1 in 2018 overall showing a hint of deteriorating affordability.
Supply And Demand Struggle: The common issue of supply and demand reared its ugly head as well in the market. With there being significantly more demand then supply, even with the slight improvement in spring to housing inventory.
Move From Urban To Suburbs: Sometimes people get tired of the loud and busy cities. And that is just what happened back in 2019 where we seen waves of people, many of which the growing Millennials, moving to suburbs. This could be for a few reasons: starting their new stage in life and building families, more affordable, and fleeing population centers for fear of the Coronavirus.
Millennial Domination: People grow up and that is just what is happening with Millennials like mentioned above. As they grow up and start families, they have expanded through the housing market quite rapidly in 2019.
Investors' Took Up Arms: Ok not in a violent way, but 'non-individual' home buyers blew up and took a large part of the 2019 market. According to realtor.com, "investor home buying growth outperformed total home sales."
The Coronavirus Market
With a quick reminder of what was, we can start to look at what is. And thankfully its not all bad news, though there are things that will take years to normlize. And new elements of real estate rose from the ashes that stand to be permanent editions.
Drones, Video, Photo House Showings: When in person home showings became outlawed and out of place. Tech soon rose to the challenge and people innovated using drones and other media to show off houses. 3D virtual home tours also grew to a new level of popularity.
Continued Investor Dominance: At least one element kept somewhat constant and that is the buying power of home investors. It boomed to a record high of 28% of all single family homes in the first part of 2022.
Remote Work Is King: Covid changed how we work for good. That is undisputable and as much as Musk may want to change that with a iron fist, people have make their decisions. While there are both great things that this allows, and also some negatives, the effect on the housing market is the same. Buyers want bigger homes in lower costing areas. While we don't want to spend more time on this idea here, we talked about working from home in more depth throughout our "Customer Trends In 2022" blog.
A Hot Market: With people sheltering in place for so long and with no one buying. It was only a matter of time before interest rates fell fast. This combined with a fear of low housing stock all worked together to create a very hot housing market. Though as of the end of 2022, sales have cooled, fear of recessions looms, and mortgages rates crossing 6%, the market seems to be on a correction path.
The Hot Market Motivated People To Sell: Seeing the opportunity many people started to sell their homes. Many of which at "premium prices." A main reason for this was the growth in remote work alongside market conditions. Many of which also had inspections waived leaving lots of homes in bad condition since sellers had little motivation to fix them up before hand.
Every aspect of the homebuying and selling process was changed and as people sell, buy, and inspect like they used to. People are wondering with some level or trepidation, what does the future hold?
2023 And Beyond
The question everyone wants to know, is will everything go back to normal? We don't think so. The foundations where shaken to much to be put back in place, but thankfully we avoided a complete collapse. Some of the things the future hold may even be good. And while we can't see to far into the future, there are some indicators that we can look at now to help guess what may be in store.
Unknown Mortgage Rates: While surging mortgage rates have applied a needed pressure for the market, they have slowed and begun to decline as of recently. Though many experts have jaded feelings on if the rates will hold their slow decline or crash in 2023.
A Still Tight Housing Inventory: We all know how tight the inventory was during COVID but slowly construction rates keep it tight. According to the U.S. Census Bureau and The U.S. Department of Housing And Urban Development building permits are down from 6.1% and 2.4% in October. Many are unsure if inventory will grow or stay tight.
Prices May Fall - Not Crash: Experts estimate that prices will actually drop. While prices in other markets may increase. It is also assumed that the market will cool, and not crash. Though only time will tell.
Foreclosures: Finally experts are not expecting a 'normal' level of foreclosures until mid-2023. But this is dependent on if there is a recession or not. If we have another downturn the rate may go up.
The future may be impossible to fully see, but with these indicators we can start to paint a picture of what might happen. And at least that is better then no idea at all.
Hopefully this puts some ease on your worries as we come out of the other side of the tunnel. And while we are still on uncertain ground, its a lot better then it was this time last year.
And if you are worried about your referral business going into 2023, NuOp is here to help stop that fear. Make sure to sign up for free and gain access to tools and high quality referrals that will help you become the Pro you are. And if you liked this blog make sure to check out our growing list of helpful content.