The average home price in the US in May rose 4.2% compared to a year ago. The data show that prices for cheaper homes grew faster than the rest of the market, rising 6.7% from a year ago.
The coronavirus chaos helped shape the housing market by influencing everything from the direction of mortgage rates to the inventory of homes on the market to the types of homes in demand and the desired locations.
The medical emergency chaos pushed the US economy into an unprecedented instant recession as many businesses shut down, which in turn caused The Trump Fed to dramatically lower interest rates. The average mortgage rate fell from around 3.75% at the beginning of the year to under 3% in a matter of weeks after the pandemic struck the US.
That sudden decliner in mortgage rates was an instant boon to home affordability allowing qualified buyers to afford much more expensive homes while keeping the same monthly payments.
“A 0.75 percentage point drop may not seem like a lot, but it’s like handing $40,000 to a buyer of a $475,000 home, who is able to get more house for the same monthly payment,” said a senior economist at Redfin.
The chaos also caused sellers to delay putting their homes on the market. Sellers, who are typically older than buyers, were concerned about the economy, worried about their jobs, generally reluctant to have strangers enter their homes, or some combination of the 3.
The supply of homes available for sale in May dropped nearly 30% from a year earlier.
The lack of foreclosed properties for sale was also a minor factor, as states and the federal government-imposed moratorium on evictions and foreclosures.
Like nearly every other industry, Real Estate came to a halt in March when the country’s governors put stay-at-home orders in place. But once those orders were lifted, buyers who were intent on buying in Y 2020 before the chaos came back in the market.
The boost in home affordability likely played a part in driving up prices for starter homes, or those priced in 1st 1/3rd of the market.
It is too early to tell whether an exodus from cities to the suburbs will be long-lasting. Many employers told employees to expect to work remotely until early Y 2021, with some companies talking about at least some work done remotely indefinitely.
The chaos has temporarily changed the type of homes in demand. Families are looking for homes with rooms, especially if children may be doing remote learning for the foreseeable future.
Home prices have been rising while the nation is recovering from the grips of the instant recession.
The Trump Policies are working.
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