Tags: Coronavirus | Financial Markets | apartment | renting | prices

Could There Be a Post-Pandemic Housing Boom?

Could There Be a Post-Pandemic Housing Boom?
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By Sunday, 31 May 2020 05:19 AM Current | Bio | Archive

The housing market is in unusual territory, thanks to the COVID-19 pandemic.

Some people are out of work, and unable to save up a down payment for a home or make a new purchase. Others are uncertain about their economic future, and are reluctant to buy.

So while there are still people actively moving to new locations and buying homes, new home sales and real estate activity in general have declined in the months during this pandemic.

That said, there’s a body of evidence and historical trends to suggest that there may be a significant housing boom once the pandemic is over.

But why is this the case, and how could it happen?

Millennials and Affordable Prices

For starters, millennials (who are now in or approaching their 30s) have bought houses at a lower rate than previous generations. Millennials often favor renting over owning for a variety of complex reasons, but the most obvious factor influencing their decision is the relatively high price of housing. Homes are more expensive, relative to median income, than they’ve ever been in the past, prohibiting new buyers from entering the market.

The recent decline in buying activity and housing prices could represent a perfect opportunity for these reluctant millennials to finally purchase their first home — especially now that they’re earning more money in better-established jobs. After calculating the true cost of a home loan, and viewing modern prices, a new generation of people could find it perfect to enter the market.

A Return to Normalcy

It’s also worth noting that the "end" of the pandemic, if there is a true end, will mark a return to normalcy. Many people who were furloughed or laid off will go back to work, and people will be engaging with each other the way they used to. People who held off on buying a home because they were uncertain about their financial future will have a restored income and new certainty that could encourage them to return to their delayed decision.

The Desire to Move

During the pandemic, people have been stuck inside their existing homes, becoming all too familiar with their flaws and inadequacies. People who live in a studio apartment, or those who choose to live in a smaller space than they truly want so they can save money, have likely become frustrated with what was originally a comfortable space. They may be highly motivated to upgrade, or move to someplace where quarantine conditions wouldn’t be so bad.

People could also be feeling a push to a new location due to local economic conditions, or because of dissatisfaction with local laws and restrictions. In any case, people may be interested in moving across the country, or at least to a different city.

Interest Rates

After the stock market showed signs of problematic volatility, the Federal Reserve stepped in, injecting cash into the market and lowering already-low interest rates.

These low interest rates are likely to persist for some time, even after the pandemic is over and the stock market returns to normal (if it returns to normal). Lower interest rates mean more attractive loan offers, and lax restrictions on who can get a loan. In other words, home loans will become less expensive and easier to get, ultimately increasing the number of people interested in buying a home.

Housing as a "Safe Haven" Asset

Stock investors have had a hard time reconciling market data.

In response to the initial news of the pandemic, the stock market tanked, with some industries suffering massive losses. In response to hypothetically "good" news, the market sank, and in response to hypothetically "bad" news, the market grew. Stocks have been seeing unprecedented volatility, spooking investors and forcing many to consider exiting the market in search of an investment with a more stable, reliable return.

One of the best and most established "safe haven" assets, and a perfect complement to a stock investment, is real estate. Investors with extra cash and an interest in diversifying their portfolio or turning to safer assets will likely be reviewing real estate opportunities. This will result in a surge of buyers, pushing market prices higher.

The Big Question — When?

It seems clear that the real estate market is poised for a major boom in the months (and possibly) years following the end of the pandemic, with some neighborhoods and cities enjoying a bigger boost than others. The big question is, when will this happen?

There are still a lot of unanswered questions about COVID-19, with no vaccine as of yet, so it’s hard to say when the pandemic will end, or how it will end.

But when it does, the real estate market will see new heights.

Larry Alton is a professional blogger, writer, and researcher. A graduate of Iowa State University, he's now a full-time freelance writer and business consultant. Currently, Larry writes for Entrepreneur.com, Inc.com, and Forbes.com, among others. In addition to journalism, technical writing and in-depth research, he’s also active in his community and spends weekends volunteering with a local non-profit literacy organization and rock climbing. Follow him on Twitter (@LarryAlton3), at LinkedIn.com/in/larryalton, and on his website, LarryAlton.com. Read Larry Alton's Reports — More Here.

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There are still a lot of unanswered questions about COVID-19, with no vaccine as of yet, so it’s hard to say when the pandemic will end, or how it will end. But when it does, the real estate market will see new heights.
apartment, renting, prices
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2020-19-31
Sunday, 31 May 2020 05:19 AM
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