Despite the fact that the coronavirus pandemic left millions unemployed, destroyed the economy, and saw businesses closing their doors left and right, there have been rising housing prices across the United States. Even though the market dropped in the beginning stages of the pandemic, it made a rapid and relieving recovery, with median home prices hitting a high in July in spite of the impending recession and economic crisis.
Even with all the madness going on, the housing market is historically driven by two factors: demographics and mortgage rates. And regardless of everything that has been going on, neither of these two factors has suffered in the wake of the coronavirus outbreak. It might seem counterintuitive given the current state of the world that the cost of homes is increasing, so why do home prices continue to climb?
Cheap Mortgage Rates Causing Rising Home Prices
Mortgage rates are a significant and defining factor in propping up the housing market. Almost immediately after the initial outbreak of the pandemic, interest rates for mortgage loans hit a historical low.
For the past several months, they have stayed consistently around the 3% mark, and have even dropped below 3% at certain points in time. For the many Americans that were fortunate enough to remain employed throughout the COVID crisis, such low rates may have encouraged house shopping rather than deterred it.
These historically low-interest rates have made it hard for those in the market for a new home to resist jumping at the opportunity to buy, despite everything that has been going on.
Declining Fear Initiating Rising Home Prices
Back in March, at the start of the pandemic, fear, and concern about the unknown trumped almost everything else. Truly little was known about the virus, most people were stuck inside, or quarantined, and universal panic had set in everywhere. It seemed the majority of Americans were far more interested in hoarding toilet paper and hand sanitizer than they were in purchasing a property.
Recently, however, despite the fact that the actual number of coronavirus cases has skyrocketed, the fear of the virus has fallen significantly. Now, after months of living in a strange alternate reality, most people are eager to return to their version of “normal” life. For many, the new normal includes taking advantage of those low-interest rates or continuing their pre-pandemic house hunting.
Demographics of Rising Home Prices
Even though unemployment and furlough have been destructive and left millions of people in a tight spot, there are still over 100 million Americans who kept their jobs and have managed to maintain a secure income.
Statistically speaking, 20% of the 5 million homes that are sold annually in the United States are purchased with cash, which means that it only takes 4 million mortgage borrowers each year to keep the market stable. When you look at those statistics, the math is simple: even with the pandemic raging on, the current demographics work out in favor of the housing market.
Avoiding Foreclosure Crisis Leading to Rising Home Prices
Fortunately, it seems that foreclosure history is not due to repeat itself (at least not yet). When the recession hit in 2009, foreclosures ran rampant, and all those empty homes significantly affected housing prices, causing them to drop drastically.
However, it seems that the lesson was learned this time around, with mortgage forbearance plans put into place almost as soon as the virus outbreak began. The millions of Americans who were struggling financially from the economic impact of COVID-19 were able to take advantage of these forbearance plans, which fortunately kept them in their homes and prevented mass amounts of foreclosures.
Earlier on in the year, after learning that a massive 20 million jobs had been lost in less than a month, you could be forgiven for predicting that the next crisis would be a detrimental housing market crash. During the Great Recession, housing prices dropped by almost a third, and nine million jobs were lost, so it is easy to see why so many feared that the housing market would take another serious hit this time around.
Fast forward to today, and despite the effects of the virus still wreaking havoc on most of the country, it is a pleasant surprise to see home prices continuing to rise rather than fall.
To learn more about the rising home prices, get in touch with one of the title and escrow specialists at Plymouth Title Guaranty Corporation.
Please note: The safety of our staff and clients is our highest priority. Effective immediately, Plymouth Title Guaranty Corp. will be taking the following precautions to limit the spread of the COVID-19 virus:
All purchase transactions need to take place at a Plymouth Title Guaranty Corp. closing office
- If a party to the closing is not feeling well, please contact your closer prior to the closing so appropriate precautions can be taken.
- We ask visitors to utilize the restroom in our building upon arrival to thoroughly wash hands before entering our office.
- Only individuals required to sign and/or deliver documents at closings will be allowed in our office. Specifically, closings will be limited to borrower(s), seller(s), agents, and lenders.
- All pens used in the closing will be given to the client after use.
- All closing rooms will be cleaned and disinfected in-between each closing.
- Those picking up checks at our office will be instructed to call our main line and request to speak to a staff member who will plan for delivery to the lobby or parking lot of our office.
- All staff will refrain from shaking hands before or after closings and ask clients do the same.
Please be advised that our staffing may be impacted during this unprecedented event. While we are committed to continuing to provide outstanding service, we ask for your patience in the face of this pandemic.