The real estate market has, in turn, blasted off. The stay-at-home culture from the pandemic hit customers actually where they live, and requirement for housing has yet to ease up. Low home loan rates only added fuel to the fire.
As the U.S. housing market booms, a parallel rise in residential real-estate costs across the world from Amsterdam to Auckland is increasing fears of possible bubbles and prompting some governments to intervene to prevent their markets from overheating.
The unmatched quantity of offers is a symptom of a pandemic-related surge in home sales. According to a September report from the National Association of Realtors, existing home sales reached a 14-year high last August. Similarly, housing supply hit a record low in September, and dipped even lower one month later to 2.5 months of supply.
Given the low inventory, home prices are also on the rise. Prices soared through the end of 2020, jumping the most in seven years by December, according to the S&P Case-Shiller US home-price index. Phoenix, Seattle, and San Diego saw price increases among the 19 cities surveyed.
Real estate frenzy is driven by a combination of factors. Home loan rates hit record lows a dozen times in 2020 alone, and also the pandemic induced a desire for outdoor space or a more comfortable work-from-home arrangement.
Southern California home prices reached an all-time high in February as buyers ran amid a shortage of homes for sale, adding to signs that pandemic home-buying trends are extending into 2021.
The information show that the rise in request, however, has not been met by a surge in listings, resulting in bidding wars and subsequent higher prices.
A major factor in the sales and price boom has been a drop in borrowing costs throughout the pandemic, with the average rate on a 30-year fixed mortgage falling below 3% for the first time.
Higher loan rates do not look like dampening demand for home purchases but they are crimping refinance volume.
Mortgage applications to invest in a home rose 3% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. That is the fourth straight week of gains. Volume was 26% higher than a year ago. Annual comparisons, however, will likely end up with large over the next month since homebuying stalled at the start of the pandemic one year ago.
The great COVID-19 migration is probably going to hinder the bottom half of home searchers within the coming years, experts say, though it remains too quickly to parse through causal data.