What will the housing market look like post-COVID?
The past 15 months have been anything but normal. As the country slowly returns to a pre-COVID way of life, a new question arises, ‘What will the housing market look like in a post-COVID world?’ Let’s examine a few aspects of the housing market and what we could expect moving forward.
Interest rates have been steadily creeping up for the past few months. While they are still historically low, many experts believe they will continue to rise if the economic outlook stays positive. Expert predictions vary drastically. The National Association of REALTORS® predicts interest rates to be at 3.00% by the end of the summer for a 30-year fixed loan. By contrast, Wells Fargo is predicting a 3.65% interest rate. Fannie Mae and Freddie Mac currently come in more toward the middle at 3.10% and 3.30%, respectively. There is no real consensus.
According to Norada Real Estate Investments, the median home listing price reached an all-time high of $375,000 in April—up 17.2% compared to the year before. Although that significant jump can be attributed to a flat housing market from the previous year, the trend of increasing home prices is expected to continue. Zillow anticipates home prices to grow 6.2% throughout 2021—with some experts predicting double-digit growth. In short, with home prices seemingly rising due to a lack of supply and an increased demand, home price growth will conceivably continue until the supply increases or the demand lessens substantially.
According to Zillow, housing inventory, which has been experiencing a shortage for years, is currently 30% lower than it was this time last year. Luckily, with home prices rising, a trend anticipated to continue at least through 2021, it is believed that at least some current homeowners may be looking to sell, so they can cash in on their gains. Currently, 38% of participating Zillow experts believe homeowners looking to sell their homes due to the increased home values are the most likely source of housing inventory growth. In fact, a recent study performed by Zillow has uncovered that approximately 8 million households have said they are more likely to sell their home and move as a result of the pandemic. Another 14 million households say they may be interested in selling their home once vaccination rates have improved.
The use of digital mortgage tools designed to make home shopping easier became a necessity in a COVID-19 world. In particular, features like eSignings and virtual tours reduced the need for face to face interactions and improved the customer experience. According to Zillow, one in three people would rather view a home virtually than in person. Also, 79% of Americans said that they would like to have the option to take a virtual tour. An Infosys report found that eSignings make the application process easier by cutting down on physical paperwork, and they speed up the mortgage approval process which leads to faster loan closings—an advantage for many customers.
While the COVID-19 pandemic has changed the way we do things in almost all aspects of life, the low interest rate environment, a housing inventory shortage and an explosion in housing demand has led to one of the most robust housing markets in history. Many signs lead to the current housing market boom continuing for the foreseeable future in spite of the expectation that interest rates will rise as the year progresses.