The coronavirus pandemic has had sweeping effects on the U.S. economy. Unemployment reached Depression-era lows, the financial markets tanked, and businesses shuttered across the country.
And the housing market? That felt the burn, too.
Forbearances surged. Popular iBuyers like Opendoor and Offerpad halted operations. At one point, mortgage applications decreased nearly 30 percent in just one week.
That was spring, though. It’s now summer — not that far removed from the first COVID-19 case hit — and it seems housing may be on its way back up. In fact, according to data from the Mortgage Bankers Association, mortgage applications to purchase a home jumped 26 percent in just May alone. For the first week of June, refinance applications were up another 11 percent.
Why are people buying and refinancing homes right now?
Unemployment is still at over 13 percent, so finances are strapped for many Americans.
Still, mortgage applications are rising despite it all. Buyer demand is up, too. According to real estate brokerage Redfin, overall demand from homebuyers is now up 25 percent over pre-pandemic levels.
What’s causing this jump in activity with all that’s going on? There are a few factors:
1. Low mortgage rates
Rates on 30-year, fixed-rate mortgages hit record lows in May, at one point reaching 3.15 percent. For buyers, those low rates can mean a more affordable mortgage payment or more homebuying power.
Credible can help you to compare rates, loan terms and assess your likely mortgage payment. Visit today to see what a mortgage loan might mean for you.
“Homebuyers can now afford more home than previously budgeted thanks to mortgage rates floating at or near historic lows,” said Bill Banfield, EVP of capital markets at Quicken Loans. “Their housing options are increasing significantly – all while maintaining the monthly payment they can comfortably afford. This sudden surge in buying power offers a great opportunity for Americans searching for a new home after months of being confined during the period of quarantine.”
Low rates are also good for existing homeowners. Just a small dip in rates can mean big savings — both on the monthly payment and in long-term interest costs. In fact, according to the latest Mortgage Monitor report from data firm Black Knight, about 14 million homeowners could shave at least 0.75 percent off their mortgage rate through refinancing.
2. Reopenings and lifting of stay-at-home orders
Many parts of the country have started lifting shelter-in-place orders, and businesses and workplaces are beginning to reopen. As this happens, homebuyers who may have been putting off their purchases are getting back into the market.
Homeowners are starting to feel more comfortable going out, too — including to the various lenders and title companies required to refinance their loans.
3. Demand for more space
After months in lockdown, often with kids, spouses, and extended family members, many Americans are feeling stifled. They’ve been homeschooling, working from home, and confined to small spaces for weeks on end — and it has many yearning for a more spacious property.
Many are looking for houses with home offices, more outdoor amenities, or just extra rooms to allow for more privacy. There’s also been an interest in moving to the suburbs and more rural parts of the country, particularly from those living in urban regions. This is likely a result of social distancing recommendations, as Americans look to create more space between them and their neighbors.
Should you make your move?
With mortgage rates so low, it could be a good time to buy a house, but keep in mind: housing inventory is low right now. That means fewer options and more competition as you hit the market.
To stand out from other buyers, make sure you get preapproved for your mortgage loan before shopping for your home (Credible can help here) and increase your earnest money deposit if you’re up against a bidding war.
You can also write a letter to the seller making a personal appeal for the property or include an escalation clause, which increases your offer — up to a certain point — if you get outbid.