Covid has affected every aspect of our day to day lives. From our employment to our homes, the pandemic has wreaked havoc.
For those who were considering buying a home pre-pandemic, you might be second-guessing yourselves now and considering something less permanent like renting. Buying vs. renting has never been such a difficult decision as in 2020.
We’re diving in depth to figure out what the best option is for potential homeowners.
How Has Covid Affected the Housing Market?
Early predictions when the pandemic had just begun sweeping across the globe were bleak. Many experts predicted the housing market would crash at some point in 2020. Fortunately, those predictions didn’t come to fruition.
Most of these predictions were hasty. As soon as it became clear the pandemic wasn’t going to just go away, housing market crash predictions cropped up everywhere. Much of this was due to the initial lockdown stopping any actual moves from happening.
Fast forward to now, at the end of 2020, and the majority of those who predicted a crash in 2020 have retracted their statements. Low mortgage rates have helped encourage buyers back, and demand is high. Home prices are rising in areas they usually wouldn’t.
Much of this is due to companies deciding to go permanently remote. Those who lived in prime real estate areas no longer need to and can afford to move out to larger homes in the suburbs.
This has led to an imbalance of supply and demand. Housing inventory is low in much of the US, making it a seller’s market currently.
Buying Market 2020
This September, the National Association of Realtors (NAR) reported existing home sales had soared 9.4% month-on-month. This was impressive news on its own, but when we compare this to year-on-year, it’s a 21% increase from September 2019.
The NAR also reported that the total housing inventory had declined month-on-month and year-on-year. By the end of September, there was a record low supply of only 2.7 months.
This lack of supply has helped house prices continue to climb. Year-on-year, the median home price has risen 15% to $311,800. Of the houses sold in September 2020, 71% were on the market for less than a month.
All this is to say, the housing market currently is very healthy, despite the pandemic. While it is a seller’s market, it would take some huge market changes for this to vary anytime soon.
The demand isn’t solely due to the new remote working norm. Lenders dropped mortgage rates to record lows this year. This is due to the decline or stalling of inflation throughout the year, thanks to the pandemic.
Just last month, the average 30-year fixed mortgage rate hit a record low for the 13th time this year. Currently, the average is 2.72%. This alone is enough to tempt many buyers into the market before the rates inevitably climb back up.
Will the Housing Market Hold in 2021?
Though the majority of experts retracted their predictions about the housing market crash, not all have. Some have moved these predictions back to 2021.
Some of this isn’t actually pandemic related at all but related to the expiry of the CARES Act in 2021.
Cast your mind all the way back to the US housing market crash in 2008. One of the major causes of the crash was the number of mortgage loans in forbearance. To prevent a repeat of this, the CARES Act introduced a federal mortgage forbearance program.
As this expires in 2021, with no word about whether there will be a replacement, some are concerned there may be a repeat of 2008. Unemployment continues to remain prevalent due to the pandemic. This will likely mean the market will have many delinquent loans when the program expires.
While this is true, it’s a bit like comparing apples and oranges. In the 2008 crash, the number of delinquent loans was more than 10 million. In October 2020, the number of loans in forbearance was 2,977,000.
The latter number is also dropping as the pandemic loosens its grip on the world. Back in May, the number of loans in forbearance was 4.76 million. It’s dropping considerably week on week as the economy begins to heal from a difficult year.
So while we may see some change in 2021, it’s extremely unlikely to be of the same scale as the 2008 crash. For buyers, this may actually bring some more inventory to the market and help push it back into their favor a little.
Housing Rental Market 2020
The housing rental market is a different picture. It’s been hit worse than the buying and selling market due to the pandemic.
Much of this is due to widespread unemployment throughout the year, which in turn stopped many renters from paying their rent. Many states put in temporary eviction bans and introduced new rental assistance programs to help citizens hit by the pandemic.
With eviction moratoriums and programs due to expire in January, the future of the US’s rental market is harder to predict.
It’s estimated outstanding rent debt will reach $7.2 billion by the end of 2020. This same study states this figure could reach $70 billion by year-end without any further stimulus help.
The figure is far lower than the $1.3 trillion crash in 2008, but far more people are affected. It’s estimated that around 30 to 40 million people may face potential eviction. Without something put in place to help these residents, the rental market may face a crisis in the near future.
Some of this disparity in the two markets can be explained by income disparity. White-collar workers were largely spared from rising unemployment throughout the pandemic. These workers are more likely to be homeowners.
Blue-collar workers, especially those living in populated cities, were not so fortunate. They’re also far more likely to be renting.
Buying Vs. Renting
So which is best — buying vs. renting?
Currently, with such low mortgage rates and a fairly stable future, we’d recommend buying even in the seller’s market.
If you’re rolling your eyes and looking at your credit score, thinking buying is a pipe dream, don’t be so hasty. One of the best options for those with no credit or bad credit is rent to own homes.
We specialize in rent to own homes in Dallas TX. We’d be delighted to help you find your new home in popular areas, including rent to own homes in Fort Worth TX, and rent to own homes in Arlington TX.
Just get in touch today.