We all know the pandemic had a serious effect on the global economy, causing several sectors of nations’ economies to crumble. In the United States, several sectors pulled out an all-time low in their returns as workers were forced to stay back to work from home. It was reported that over 40 million Americans lost their jobs as companies considered downsizing as the way out. The housing market’s experience was not different. In March/April 2020, when the pandemic was intense, Washington Post estimated that home sales were at 4.33 million while new construction dropped by 15% — a dip that has not been experienced in almost a decade.
Despite the decline, the housing market was able to dust off the pandemic scales. It capitalized on people’s desire to switch to a larger and more comfortable apartment that can accommodate their workplace and extended family time. Also, the falling mortgage rates created a fertile ground for the housing market to grow. As of January 2021, mortgage rates were at an all-time low of 2.65% with a relatively high refinance rate. Another complementary factor was the high demand for houses and the limited supply.
According to Mortgage News, mortgage rates as of January 2020 were around 3.75%. When the pandemic was reaching its peak, the mortgage rates dropped massively though there was a slight increase in April after introducing the economic stimulus package. Since then, the mortgage rates have been on a downward trajectory, hitting 15 all-time lows in 2020 and another in January 2021. The downward trend of the mortgage rates leads to a corresponding increase in the home sales market. Additionally, the increasing employment rate as the economy opens up makes the housing market attractive. It presents it as a sector with a lot of prospects.
As of December 2020, when mortgage rates hit the 15th record low in a single calendar year, applications to refinance mortgages by Americans were at an upward trend which was 105% higher than the same week in the preceding year. Black Knight, a mortgage data aggregator, recorded that lenders did $2.8 trillion in refinancing their mortgage in 2020. Towards the end of 2020, Black Knight observed that 46 million homeowners were responsible for $7.3 trillion in tappable equity. The high mortgage refinance rate is a factor that has created a positive aura in the home-selling market. The effect of the high refinancing rate could be beneficial for a long time.
Another major positive about the housing market is that the supply is at an all-time low. As of March 2021, Realtor statistics suggest that there are 27percent fewer listings than the expected listings. The company also indicates that the homes available for sale in February were slightly lower than half of the homes available for sale last February. As CNBC suggests, this is one of the most competitive housing markets in history that carries an invaluable prospect.
The housing market seems to have recovered pretty well from the pandemic due to some situations that created the ideal momentum for the sector to thrive. However, while some worry that the mortgage rate may soon be on an upward trajectory, the limited supply and the reopening of the economy are positive factors that can stabilize the housing markets.
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