The shifts over the past two years can’t be overstated. The real estate market has been drastically impacted in ways that would have been unimaginable two years ago. Mortgage rates below 3 percent? Buyers waiving appraisals? Boise, Idaho becoming unaffordable? These are things that were inconceivable two years ago, but now they’re reality. Let’s dive in and take a look at the four biggest transformations in real estate.
Mortgage Rates Dropped to Historic Lows
After the initial shock of the pandemic wore off, millions of people decided that it was time to buy a house, largely due to the drop in mortgage rates. In February of 2020, rates were 3.625 percent, but dropped to 2.5 percent for a 30-year fixed rate mortgage. They’ve since gone back up above 3 percent, and are expected to rise further this year.
Almost Every City Became a “Hot Market”
With so many people newly able to work from home, there was no longer a need to stay in expensive markets like New York, California and Seattle. That prompted a massive exodus to cities such as Phoenix, Austin, and Atlanta, where people saw their properties rise to historic levels. But it wasn’t just mid-sized metros that experienced this. Kansas City, Raleigh, North Carolina, and Boise, Idaho all saw massive jumps in the average home price. Boise was one of the cities that saw an especially large jump, with a 19.8 percent year-over-year increase in December 2021. About the only places that weren’t hot markets in 2020 and 2021 were New York, Los Angeles and San Francisco, which all saw a dip in demand.
More Reliance on Technology
While online home listings had been the industry standard for many years prior to the pandemic, in the past two years, the reliance on technology for buying and selling property has increased dramatically. In some cases, people made offers on houses they hadn’t even seen in person. A lot of this was made possible by sellers who implemented virtual 3D tours of their properties, which was especially useful for people who were looking to buy several states away. In addition to online tours, appraisals started to be conducted remotely and documents could be submitted online. Thanks to these developments, the average listing time on the market went from 30 days to 17 days.
Demand Outpaced Supply Almost Everywhere
Prior to 2020, buying a house in most of the US was a straightforward prospect. There were more densely populated areas where buyers might experience bidding wars, but in the pandemic, that competitiveness spread to a lot of smaller markets. Housing scarcity was redistributed across the country due to the number of people who had relocated to less expensive cities. In addition to the people who were relocating, long-time residents in smaller markets also decided that it was time to buy. That has led to the lowest amount of homes available since the 1970s. According to CNBC, the US needs to build 5.24 million homes to meet existing demand, and increase of over 1.4 million from the 2019 shortage of 3.84 million.
While the lockdowns that prompted these changes are quickly becoming a memory, many of these changes will linger for years. The one thing that is likely to change back are mortgage rates, which are already rising back up to their pre-pandemic levels.