Home sales across the United States are picking up again despite the sudden loss of some 22 million jobs due to the coronavirus pandemic. How does that make sense? Record-low mortgage rates and a lack of homes for sale are two key reasons that help explain the dramatic rebound. However, those factors do not tell the whole story.
Rates on 30-year fixed mortgages dipping to a record low have helped but borrowing costs have remained historically low ever since the 2007-’08 global financial crisis. It also is not new that low levels of new construction have led to an older stock of U.S. homes and low overall supply.
Economists at Bank of America have listed three other key factors that are working to keep the housing market going strong. The first is that the Pandemic-induced recession has hit lower income workers much harder than those earning $75,000 or more per year. As the median income for home buyers is above $75,000, the housing market has not suffered as much as one would expect.
Another factor is that the $2.2 trillion Cares Act included a 12-month forbearance option for borrowers with federally backed mortgages, with the goal of reducing stress on the housing market from delinquencies. The forbearance option has clearly limited downward price pressure on the market.
Finally, as companies have realized that “work from home” is a viable long-term option, workers who were renting in large cities are making their way to less urbanized areas to purchase homes. This trend initiated with an exodus from New York City, but appears to be spreading as the Pandemic is continuing to grow.
The ultimate real estate question is whether the current solid housing market will continue down this trend. Most of the factors above cannot change overnight. That leads me to believe that the short-term outlook continues to be positive for those looking to buy and sell in our area.