It’s understandable that since the pandemic began, many prospective homeowners have questioned whether or not to move forward with their home buying plans. Economic instability, COVID-19 safety concerns and rising home prices are all valid reasons to create uncertainty in consumer’s minds. There are a variety of factors that point to this recession looking different for the housing market than what you may assume.
During the Great Recession (2007-2009) home prices declined 33% nationally according to CoreLogic, a global property analytics site. With that memory still fresh for a lot of buyers, it’s no surprise why there may be a fear that home prices will do the same during this economic downturn we are currently facing. However, since 1975, home prices have only declined once (The Great Recession) out of five total recessions. Lending standards have changed drastically since that time, becoming a lot stricter and eliminating most of the loan products that were a leading source for more than ten million foreclosures during 2007-2009.
Although home prices continue to rise, interest rates are at historic lows which directly impacts your purchasing power. Black Knight, a leading provider of data and analytics across the real estate industry, shared that buying power is up 10% year-over-year which equates to being able to afford about $30,000 more house today than you could last year, without an increase in monthly payment. Locking into a fixed-rate mortgage for the duration of your loan will ensure that your payment will not balloon over time due to fluctuating interest rates.
Home prices in the US have continued to rise for 97 consecutive months and the median home price has increased 8.5% since this time last year according to the National Association of Realtors (NAR). While some buyers have expressed concerns with rising home prices and an anticipated market correction looming, real estate reports and experts paint a different picture. Zillow’s latest Market Report (September 2020) predicts home values will rise 7% in the next year. NAR’s Chief Economist, Lawrence Yun, says home sales will be higher this year than last, and even higher through the end of 2021 predicting an 8% increase year over year. Despite uncertainties in the labor market and the other challenges, home values are anticipated to continue to rise due to a combination of high buyer demand and limited housing supply.
If you were looking to buy or sell pre-pandemic, now is still a great time to continue those efforts. Historically, housing prices have only decreased during one of the last five recessions and that was due to the recession being tied directly to the housing market. Interest rates are at an all-time low which allows you to lock in low rates long term and increase your buying power. Furthermore, economic experts and other key indicators predict the housing market will continue to increase through the end of 2021 at least.