In early 2020, the real estate market was buzzing along. There was talk of a mysterious illness overseas, but the thought of it upending life in the U.S. hadn’t come close to the mainstream.
The first case of SARS-CoV-2 in the U.S. was confirmed on Jan. 20, 2020, in Snohomish County, Washington. It would begin its invisible spread into homes across the planet.
It would also mark the beginning of the COVID housing market in the U.S., a time of unexpected reactions by buyers hungry for a change in lifestyle, sellers unwilling or unable to take advantage of record prices and agents and brokers working through it all.
Since then, nearly 70 million Americans have been infected. Close to 900,000 have died. New strains have led to case surges. Vaccines developed at rapid speed provided a welcome level of protection before a new strain, Omicron, propelled the virus to unimaginable levels at warp speed.
Yet through it all, the nation’s real estate market appears to have taken an unlikely path to all kinds of records. The events from the past 24 months have led to a standoff between buyers facing record-low inventory and record-high prices, and sellers either priced out of relocating or deciding whether to list before rising mortgage rates cool the market.
The great reshuffling
At the onset, office workers fearing the arrival of the mysterious virus bunkered down at home.
Weeks of anticipation that the nation could stymie the virus turned to months. Temporary remote-work policies became permanent. Workers looking for more space began shuffling across the nation, many of them in search of bigger homes.
Low inventory, high prices, record sales
Inventory has remained low throughout the pandemic. The supply of available homes fell to the lowest level since tracking started more than two decades ago.
“This extremely constrained level of supply limits the ability for households to a) shift to homeownership and buy a home, b) move up or c) downsize, and in-turn, vacate the stock they currently occupy,” the National Association of Realtors said in a June report.
Home values have been on a steady upward trajectory nationwide since bottoming out in February 2012. The pace rapidly changed in July 2020, marking the first of 17 straight months with double-digit price gains that continues today.
All the unexpected pent-up demand and short supply rapidly drove up the cost of housing, and forecasters now expect housing — whether for-sale or rental — will remain permanently higher than before the pandemic began.
Whether an ensuing sales cycle lasts all year is anyone’s guess. Starting the year with low inventory, high prices, rising mortgage rates and huge numbers of millennials entering the homebuying market has set up a game of chicken of sorts.