COVID-19 vaccines are the talk of the year, especially since they are supposed to bring an end to the financial crisis. But will they impact the housing market?
The COVID-19 has caused a financial crisis which has caused pain and hardship all over the US. At the same time, this has impacted the housing market. The number of buyers declined as the sellers pulled their houses from the market.
Then, suddenly, the buyers rushed back, trying to catch those few houses left, and the prices skyrocketed. This caused bidding wars and turbulences on the market.
As the vaccines are being rolled out, it seems like this will impact the housing market, as well. Home sellers and buyers are ready to get back on track. However, will this have a positive influence, or will it cause even more damage?
The vaccines won’t impact anything too fast. It takes time to make an distribute them, not to mention how the general public has some concerns, and that there is now a new strain of virus. Even when we reach the herd immunity, it won’t be possible to instantly return to the old normal.
So, will vaccines impact the housing market, or will things stay the way they were in 2020?
Rise in Supply
The good news for the buyers is that more homes are expected to get listed. This means you’ll have a bigger pool of houses to choose from, instead of being satisfied with a house that is just decent. However, don’t expect this to happen overnight. While a few people will decide to list their house in the first half of 2021, it is estimated that most sellers will wait until summer and fall. This is the time when vaccines will be distributed among the residents. This way, the COVID-19 will impact the housing market less than it did before.
Many sellers fear for their health, which is the main reason why they delay listing their homes. They don’t want to get sick during an open house, which can happen if a potential buyer happens to have Covid. Baby boomers are in this risky category that isn’t likely to list a house before they are vaccinated. Once they are, they will be more likely to proceed with their plans.
Also, since the builders returned to work after being on a break for a bigger part of 2020, there will be an influx of newly build homes on the market. National Association of Home Builders predicts that around a million of new homes will erect during 2021 and early 2022.
Prices Will Slowly Escalate
The increase in supply is supposed to slow down the sudden rise in prices, but they probably won’t fall. Still, their rise won’t be as fast as it was late 2020. This will also help take some pressure off the market. The number of bidding wars will decrease, as the vaccines impact the housing market and the housing prices.
However, high demand will ensure the prices stay high. Estimates for the rise are between 2% and 6%, depending on the source.
The vaccines will also mean people no longer need to be 6 feet away from each other. In other words, offices will open and there will be open spots for more employment, raises, and promotions. As the financial state of people improves, this too will impact the housing market, giving people more money and, in return, bigger chances of becoming homeowners. The more cash people have, the more likely they are to save for a down payment. This could mean even more potential buyers on the lookout for their dream home.
Mortgage Rates Will Rise
A downside for the buyers is that the mortgage interest rates are predicted to rise. During 2020, rates reached historical lows, but this won’t last long. As the economy gets better, the interest rates will rise, leading to more expenses for the buyers. If you’ve contemplated selling your house to buy a new one to take advantage of the low interest rates, this is the right time to do so.
Many current home buyers are active precisely because they want to find an affordable home. As the higher interest rates impact the housing market, the number of buyers is expected to drop slightly.
Keep in mind that the rates are still expected to stay low – much lower than they were before the pandemic.
This, however, has a good side for the buyers as well. The slow decline in demand can lead to price dropping, so the market will stabilize a bit more. Sellers, however, might not be too happy about this, but the lower prices still might increase their chances to sell.
Will the Suburbs Remain Sought After?
Another way how vaccines might impact the housing market is by relocating people away from suburbs. However, this isn’t expected. While the prices in big cities will remain lowered, families aren’t likely to return to them. During 2020, homeowners got the chance to see the advantages of living in suburbs, and they don’t seem eager to change their newly founded way of life.
Since remote work is expected to continue to a certain extent, there isn’t much reason why people would like to throw the affordable life outside of city for their old lifestyle. Most people who don’t have to return to their offices will stay where they are now, considering how they can get more square footage for the same money, big yards, and an overall cheaper life.
If you’re a real estate investor, now would be a good time to invest in a single-family home in the suburbs, as it seems like these will stay just as popular as they were in 2020. Despite many changes a vaccine will bring, this seems to be one thing that it won’t have any impact on.