What happened this year? Seriously.
In January of this year, we took a look at some housing market trends and offered our predictions on how those trends might play out in 2020. What we couldn’t have known – what no one saw coming – was the impact that COVID-19 was going to have over everything in the months that followed.
So now that this year is wrapping up, let’s take a look back at 2020, starting with our ill-fated predictions from the beginning of the year.
Trends we were watching
In that 2020 preview article, we identified four trends we thought would characterize the market in the year ahead:
- decent mortgage rates
- limited supply
- stagnate prices
- new ways to sell
We were wrong about rates and way off on prices remaining flat. We were right about supply, though we underestimated its impact, and we couldn’t have been more right about how new ways to sell (like all-digital mortgage applications) would become more important than ever.
We lucked our way into getting two of those four trends right, which, considering everything that happened in 2020, is a pretty good mark. Let’s take a look at the factors that affected the housing market this year.
COVID hits, market grinds to a halt
The story of 2020 will obviously be the story of the pandemic. When COVID-19 reached our shores, people across the country stayed at home starting in March. This almost completely froze the housing market, as sellers didn’t want to open their homes for buyers, and everyone was in hunker down mode.
Market thaws, then gets super-hot
After a couple of months, however, the market started to adapt to these new conditions. Showings started happening virtually, and borrowers were able to offer mortgages, from pre-approval all the way to closing, through their digital technology.
And because demand had been suppressed during the typically busy spring buying season, it sprang back with a vengeance in the summer and fall. Add to this that the pandemic was pushing homeowners to look for more space and different amenities like home offices and space for remote learning, and we saw demand go through the roof.
Adding fuel to the demand fire was a perfect storm of two additional factors: low mortgage rates and a low inventory of homes for sale.
Rates so low
Because of the economic impact of the coronavirus, the Federal Reserve lowered its Federal Funds rate to or near zero to support the economy. One effect of that change has been that mortgage rates fell as low in 2020 as they’ve ever been since Freddie Mac started tracking them. That’s been a boon to homebuyers and homeowners looking to refinance.
Inventory so low
Those low rates are driving up demand, convincing people to make the leap and buy that first home or a bigger home. Also, with so many people working remotely, there has been a rise in employees moving away from where their job is located—sometimes to the suburbs, sometimes to a different state altogether.
But many are finding that there aren’t enough homes for the people that want them. As Lawrence Yun, chief economist at the National Association of Realtors®, said in September “There is no shortage of hopeful, potential buyers, but inventory is historically low.”
Prices head higher
This limited supply is driving home prices up, and it’s making for a seller’s market. The median existing-home price in September was $311,800, which was 14.8% higher than September of last year. It’s not uncommon to see homes with multiple offers within 24 hours of going on the market. Bidding wars are now ubiquitous across the country, and committed buyers are submitting offers above asking in order to stand out.
The effects of COVID-19 were the driving force of the housing market this year, even superseding the election. In past years, homebuying seems to slow down in anticipation of a presidential election, but this year, that was not the case as buyers were still making up for missing the spring selling season.
Buying a home from the safety of home
The world of real estate is more and more digital, and these online tools have proven to be invaluable in this year of social distancing. Virtual tours on real estate listing sites took on new importance and mortgage application software helped buyers safely close on the homes they found.
Guaranteed Rate invented the Digital Mortgage years before “social distance” was in the common lexicon, but this year it allowed people to buy their new home from the safety of home. Originally built for convenience and efficiency, our technology cuts down on paper and makes it easy for borrowers to avoid physical contact.
And some customers were able to use FlashClose SM to even skip the in-person closing (and with it the need to sit around a table with a bunch of strangers in a cramped room, sharing pens).
How was your year?
Wondering how this crazy year has affected your home? Well, if you haven’t already spoken with a loan officer about your mortgage, now would be a great time to do it. Especially if you haven’t considered a refinance yet.
Or you can simply take a look at your tax form 1098, otherwise known as your year-end statement. It shows how much mortgage interest, mortgage points and property taxes you’ve paid this year. It also includes how much you have left on your mortgage. You should be receiving this statement in January, so it’s a good way to see on how this crazy year might have impacted you closer to home.
Home has never been more important
If there’s one thing that this year has taught us, it’s how much we rely on our home to get us through the difficult times. This year, our homes had to take on the roles of an office, a schoolhouse, a gym and much more. So this year we’ve learned that home is much more than shelter, it can adapt to whatever we need it to be to live our life to the fullest in these strange times.
Not eligible for all loan types or investors. Eligible for conforming and jumbo loans as well as primary, 2nd home and investment properties. Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee. Title company restrictions may apply, not eligible for HFA programs. Contact Guaranteed Rate for current rates and for more information.
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