If you are trying to get a handle on the 2020 housing market and the impact of the Covid-19 pandemic the following 5 takeaways should help.
1. Mortgage rates - In 2020 mortgages rates went for a ride. At the start of 2020, the rates 3.75% for a fixed-rate 30-year mortgage. In March, when the initial impact of the pandemic was starting to be felt in America the rates dropped, but later in the year the rates fluctuated against the backdrop of sudden unemployment and social distancing. Now following the most recent stimulus bill passage and a rise in employment rates are beginning to rise again.
2. Home prices - Three things contributed to increased home prices in 2020.
- low mortgage rates
- low housing inventory
- increased buyer demand
By January 2021, housing prices rose 10% nationally. About 75 million household are not able to afford a median-priced home according to the National Association of Home Builders.
3.Housing shortage - Many homeowners remained reluctant to sell due to a variety of concerns, some associated with Covid-19. Those who did place their homes on the market during this "sellers' market" reaped the benefit of a competitive housing market. In many cases multiple offers for homes was not uncommon.
4. Urban flight - Despite the "exodus" out of many areas that were under Covid lockdown, people did not flee the cities; they simply bought larger homes in that city or relocated to smaller cities where they purchased larger homes.
5. Builder's struggled - During the latter part of 2020 when the economy began to see a resurgence, builds found themselves unprepared for the surge in demand for new houses. Coupled with the shortage of skilled laborers and buildable lots many builders had to sit temporarily on the sidelines. As construction began in earnest, material prices began to skyrocket, especially lumber. Cost increases translated into price increases in late 2020.
The impact of Covid-19 on the US economy, more specially the housing market, will be a matter of discussion for years to come, but the immediate results are visible today as 2021 housing market moves forward.
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