It has been more than a year since our country was shocked and caught off-guard when the CDC requested a nationwide quarantine for two weeks in an effort “to slow the spread” of a potentially killer virus. We had no idea of the unprecedented challenges and loss of life that would follow. The COVID-19 pandemic has had a significant impact including on real estate trends.
Space in the Suburbs
During quarantine, a new way of life emerged for many Americans and there were a variety of responses to the unprecedented challenges – panic selling, irrational buying, jittery markets, remote work. One real estate trend that resulted is the desire to have more space and a renewed interest in “big box” homes. With many people working and learning remotely, homes are being used as offices and classrooms. In addition, with travel halted and restaurants and entertainment venues closed, homes also became social hubs. People are interested in larger homes with more space for a dedicated office, remote learning and gathering as a family for entertainment.
Forbes recently reported that nearly 50% of Americans were considering a move to reduce living expenses in the next year. The survey found that homebuyers want amenities they didn’t previously consider such as a yard (27%), a bigger kitchen (18%), and office space (16%).
As people spend more time at home, there is also a desire for additional outside space for at-home activities. This desire for more space pushed homebuyers to the suburbs and has led to increased real estate activity in rural markets where homes with more land are more common and affordable. In the short term, we are likely to continue to see this trend as people leave the large cities that were hit the hardest by the pandemic and remote work options persist.
In 2020, as a result of historically low interest rates, homeowners liquidated a record amount of their equity from their residential real estate in an effort to access cash for many reasons including home improvements. According to the National Association of Realtors, the top things homeowners are doing is improving or adapting existing space in their homes to accommodate remote working or hybrid learning for school-aged family members. Investments are also being made to increase space and make time at home more enjoyable – homeowners are finishing basements, putting on additions, and updating outside areas with pools, sport courts and other recreational areas. One constant throughout this crisis has been a return to our family units – which has led to a focus on where we spend most of our time, our homes.
According to the Mortgage Bankers Association, a record $152.7 billion of cash-out refinances were transacted in 2020 with the amount of existing available home equity in the U.S. estimated at $7.3 trillion (compared to $4.6 trillion in 2006 before the Housing Crisis in 2008). Americans accessed significantly less cash in 2020 than in 2008 ($321 billion) as they seemed more reluctant to take on the additional debt. This is why economists believe this latest market movement is not comparable to the housing crisis in 2008.
Regardless of when this pandemic finally subsides, most Americans have made changes that are unlikely to return to pre-crisis patterns. COVID-19 has forever changed us and the way we live. While we may be slow to return to large social gatherings due the past year of social distancing, it’s likely that we will continue to live our lives more simply and stay closer to home. If you’re in the market to purchase a home or looking to refinance your existing home, contact Univest Home Loans at 877-723-5571 or firstname.lastname@example.org.
Univest Bank and Trust Co. is an Equal Housing Lender. NMLS #415882