Brokers are investing in coronavirus-safe homes as the future of real estate. FOX Business’ Gerri Willis and more.
NEW YORK – Clarence Swann, a tenant for most of his adult life, feared landlords would use the coronavirus pandemic as an excuse to forgive their tenants. That, with a desire to move close to family, the retired veteran bought his first home last month at the age of 74.
Swann said he used his veteran status to get the loan he needed to buy a $ 196,000 summer in Lake Wylie, South Carolina.
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“The first need at my age was that I wanted stability,” he said.
Swann is one of tens of thousands of buyers who are doubling the housing market this spring and summer, even as the coronavirus upsets the U.S. economy. The presence of these buyers, plus a sharp drop in the number of homes on the market, drove home prices to record highs in most parts of the United States, according to an analysis of house price data by The Associated Press and Core Logic.
The average house price in the US in May rose 4.2% compared to a year ago. The data show that prices for cheaper homes – those found in the lower third of prices in metropolitan areas and a typical target for first-time buyers – grew faster than the rest of the market, with a 6.7% increase from a year ago.
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The coronavirus pandemic helped shape the housing market by influencing everything from the direction of mortgage rates to the inventory of homes on the market to the types of homes in demand and the desired locations.
The pandemic plunged the U.S. economy into a deep recession as many businesses shut down, forcing the Federal Reserve to once again dramatically lower interest rates. The average mortgage rate fell from about 3.75% at the beginning of the year to below 3% in a matter of weeks after the pandemic hit the US
That sudden drop in mortgage rates was a direct benefit to the affordability of home, said economist, allowing many buyers to give home much more expensive homes while keeping the same monthly payments.
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“A drop of 0.75 percentage points may not seem like much, but it’s like handing over $ 40,000 to a buyer of a $ 475,000 home, who can get more home for the same monthly payment,” said Taylor Marr, senior economist at Redfin.
The pandemic also caused sellers to slow down to put their homes on the market. Sellers, who are typically older than buyers, were either worried about the economy, worried about their jobs, generally reluctant to let strangers into their homes, or a combination of all three. The supply of houses for sale in May fell almost 30% from a year earlier.
The lack of foreclosed properties for sale was also a small factor, as states and the federal government had imposed moratoriums on evictions and foreclosures.
“Supply and demand are not all good. I have less than a month’s supply of homes in my area, ”said Jay Rinehart, a real estate agent in the Charlotte, NC metropolis.
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Like almost all other sectors, real estate came into being in March when landowners put land orders in place. But once those orders were lifted, buyers bought that were intent on buying in 2020 before the pandemic returned to the market, brokers said.
The impetus of home affordability is likely to have played a role in raising prices for start-up homes, as those in the lower third of the market prices.
In Washington, DC, realtor Sandy Shimono said most of the activity over the past three months has been for homes between $ 400,000 and $ 650,000, which are considered starter homes in the expensive DC subway area.
“Many are tired of renting and in the end, the affordability of home seems to be an achievable goal,” Shimono said.
It is too early to say whether an exodus from cities to the suburbs will last long. Many employers have told employees to expect to work remotely until early 2021, with some companies now talking about at least doing something remotely indefinitely.
The pandemic has also temporarily changed the type of houses in demand. Families are looking for homes with rooms, especially if children may graduate for the foreseeable future.
Darin LaFramboise, 35, and his fighter had plans to eventually move from downtown San Francisco to the suburbs when they had a family. But the pandemic forced them both to work remotely and their Zoom meetings to schedule each other so they would not talk about each other. They hurried their search for a house.
“We loved being in the city center, but as soon as interest rates dropped as they did, we started looking seriously,” he said.
The couple initially ran low – even losing themselves on a property where their bid was $ 200,000 above supply – but eventually found a three-bedroom home in Lafayette, California, on a half-acre land 55 minutes from downtown San Francisco. with the train, for $ 1.65 million.
“The downtown area (of Lafayette) reminds us a lot of where we lived in SF, and we have access to markets and restaurants just like we used to be,” he said.
“Plus, we have space!”
However, there are some threats to the resilience of the housing market.
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House prices have risen while the nation is in the grip of a deep recession. Many protections that were put in place in the early days of the pandemic are now coming to an end – outbreaks begin with backup, and precedents are likely to follow. Improved unemployment benefits have also passed, with unemployed workers left to hope Congress can reach an agreement to extend them.
An analysis of mortgage data shows that roughly 7.5% of all active mortgages remain in some form of rewards program, according to financial data aggregator Black Knight. Roughly 2.2 million 3-month benefit programs will expire in September.
With less protection, and the certainty of the pandemic that will last for the rest of the year, potentially thousands of homeowners could fall behind on payments and have their homes put forward. A sudden rush of supply could dampen house prices in the second half of the year.
Furthermore, those who want to buy recently have been for the most part first-time home buyers, who often have lower incomes and are more sensitive to changes in economic fortunes than the rich.
“I think there are significant risks ahead, and that will particularly affect those buyers in the lower tiers of the housing market, but more likely, tenants,” said Marfin of Redfin.
