In the past 15 months, realtors have gone from slow walks with video camera in hand to show homes to a handful of interested parties unable to leave their own homes, to countless buyers competing in seemingly wild buying wars — then purchasing a home often sight unseen. How did the real estate market go from brisk pre-COVID sales, to few or no sales during the pandemic, then quickly ramping up to never-before-experienced sales growth? What is going on in the real estate market, and where is it headed? Let’s explore COVID-19’s impact on the housing market during this unprecedented period and where the market could possibly be heading in the future.
Before and During the Pandemic
It’s been a while since those connected to the real estate market have experienced the busy, but manageable workload associated with a brisk, but fairly stable real estate market. Nevertheless, that’s what was going on throughout much of the U.S. prior to the advent of COVID-19. Before the pandemic hit, real estate and housing was full of promise (and good profits), albeit leaning at least slightly, and in some regions leaning even more, toward a seller’s market.
When the pandemic made its abrupt entrance, the entire U.S. economy seemingly shrunk overnight. Many people lost their jobs and/or their businesses. Millions of people, even if they wanted to buy goods and services, were only allowed out of their homes to buy essentials. Along with the economic shutdown, came what was essentially a real estate market shutdown. Many in the real estate business bravely tried to keep going with virtual tours or drone shots of homes for sale, along with virtual meetings with a few potential buyers. This thankfully kept at least some in the industry afloat, but it’s safe to say that state-mandated lockdowns represented a monumental challenge to the real estate industry.
A Complete Reversal
It’s difficult to say precisely when COVID-19’s impact on the housing market took a dramatic shift, but at some point the tides definitely changed, and the real estate market became one of the hottest industries across the U.S. Like a perfect (positive) storm, the mid and post-COVID-19 eras created
- Shortages in building materials which meant buyers could only choose to invest in finished homes.
- Restrictions were lifted in many areas of the country and interested buyers could now tour homes in person.
- A confidence that life was getting back to normal, boosting the assurance that buying a home in the midst of a waning pandemic was a sound idea.
Probably the biggest factor that contributed to the current “Wild West” real estate market were mortgage interest rates. Rates already attractive, were lowered even more during the pandemic — and remained low, as people were called back to work in the aftermath that constituted the post-COVID era. Now that they had a steady paycheck coming in, many buyers found the low interest rates too tempting to pass up, and decided it was the ideal time to go home shopping.
Where is it All Headed?
At least in the near future, it’s likely to remain the best seller’s market the industry has seen in decades, if not the best seller’s market of all time. As people become more confident that the country is getting back to normal, they’ll likely remain eager to engage in spending that was put on hold during COVID-19. With regard to material prices for new builds, Forbes thinks that by 2023 the strong demand for housing will mostly be over and supply of building materials will be able to meet demand, but that is about a year and a half away.
Probably the biggest potential downturn is if mortgage interest rates begin to rise, especially if they rise significantly. According to the Mortgage Bankers Association, they expect interest rates to rise back to about pre-COVID levels by 2022, which is not that far off in the future.
How We Can Help
For those beleaguered by the frantic pace currently being experienced in the real estate market, a vague forecast of relief that may come at some point in 2022, seems a long way off. If you are overwhelmed by the hottest real estate market in decades, we can help! Transactly is a free platform that helps coordinate contract-to-close items, along with an available flat-fee pay option for our transaction coordination services. We save agents a robust 16+ hours per transaction, through our coordination services that cover 90% of the contract to close process. Give us a call today!