The great reshuffling in housing that began roughly a year ago at the outset of the pandemic — and the heightened housing demand, elevated home sales activity and rapid price appreciation that came with it — is only just beginning, and will not simply end as the pandemic slowly begins to recede.
Those with an eye on recent history can’t be blamed for thinking current market conditions are nearing their endgame, with rapid price appreciation and fierce competition for homes eerily reminiscent of the late stages of the mid-2000s housing boom.
But that view ignores the fact that the housing market doesn’t operate in a vacuum, and is driven by the interactions of a number of relatively simple but critically important fundamentals — including supply and demand, financial conditions and technological advancement.
The massive millennial generation — some 72 million strong in 2019 — the oldest of whom are approaching their 40s, is aging into their prime career-building, family-starting and home-buying years.
The combined numbers of millennials turning 34 over the next decade — the median age of first-time home buyers in 2019 — is roughly 46 million, the largest such number expected to reach that age in a single decade .
A number of factors contributed to a slow start among the millennial generation in achieving homeownership, including stagnant income growth over the past decade, rising student debt burdens and the ongoing inventory crunch that limited access to entry-level homes more than most.
In addition to this demographic-driven demand, the coronavirus pandemic itself drove housing demand even higher.
renters that currently can’t comfortably afford to buy an entry-level home in their current metro area could potentially afford the nation’s typical starter home if they took advantage of increased telework options and moved to a less-expensive locale.
This wave of buyers already in or soon-to-enter the market do face challenges given the limited number of homes available to buy and cutthroat competition.
It’s likely these low interest rates pulled some demand forward in 2020 — bringing buyers into the market sooner than they might have otherwise planned so they could lock in a low rate and avoid the possibility that rates would be higher if they stuck to their original timeline.
It is also arguably the one factor most dramatically different from the 2008-era market, when a wave of foreclosures following years of robust homebuilding pushed supply well ahead of demand and led prices to collapse.
And building is desperately needed — the homeowner vacancy rate was just 0.9% in Q1 2021, tied for the lowest single quarterly rate, prior to 2020, since 1978; the last time the four-quarter rolling average of homeowner vacancy was as low as it is currently was 1957.
And the ongoing shortage of homes itself may also have created a self-reinforcing cycle of housing musical chairs: Potential sellers were afraid of standing up and listing their home for sale, lest they find themselves unable to find a different home to settle into.
It’s worth noting here that the number of closed home sales continued to grow in late 2020 and into 2021, even as overall inventory plummeted.
Nearly 60% of millennials say they would be at least somewhat comfortable making an offer on a home without touring in person if they’ve viewed a virtual tour, and almost 40% even say they would be comfortable buying a home online.
More than two-thirds of a panel of real estate experts and economists recently surveyed by Zillow said they expect inventory will begin to grow in the second half of this year or the first half of 2022, for a number of reasons.
While the early weeks of 2021 were marked by a scarcity of new home listings as sellers stayed on the sidelines in the face of an uptick in COVID-19 cases and a string of harsh winter weather, our data indicate they are starting to come back.
Home building is not a particularly fast-moving process, and it will take time for builders to fully make up a years-long building deficit — especially as the costs of land, labor and especially lumber and other key materials keeps rising.
Certainly the widespread job loss during the pandemic has left many households behind on their housing payments or missing out on savings that could eventually be used for a down payment.
Low mortgage interest rates help to bolster buyers’ budgets even amid rapid price growth.
But that ignores the longer view.
This sustained period of low rates has helped make homeownership more accessible and affordable for millions — especially compared to renting.
Assuming median household income and a more-modest down payment of only 5% instead of the benchmark 20%, the monthly mortgage payment on the typical U.S.
Despite almost a decade of often rapid home value appreciation, affordability today is much closer to where it was in February 2012 — when home values hit their lowest point post-Great Recession, representing a remarkable bargain for buyers — than during the pre-recession years.
The beneficial impact of low rates is obvious, but it’s also critical to acknowledge several important realities — namely, that low mortgage interest rates don’t do anything to help buyers clear the largest hurdle to homeownership: Saving for a down payment.
Millions of homeowners in financial distress have applied for forbearance protection against delinquent payments on their mortgages, bringing back heartbreaking memories of the late-2000s foreclosure crisis.
But while some will ultimately lose their home, it’s likely that a large majority will not end up in foreclosure or receive an eviction notice — a panel of experts surveyed by Zillow in Q4 2020 said that 18% of the more than 2 million homeowners then in forbearance would ultimately be foreclosed upon.
These are large numbers, but nowhere near the foreclosure-crisis levels that persisted for years during the worst of the recession.
A big reason that the foreclosure wave that characterized the last recession is not expected to materialize in the wake of the 2020 recession — despite massive levels of unemployment and financial damage — is because of the recent strength of housing itself over the past several years.
A homeowner who purchased their home even as late as 2018 or 2019 that is facing financial difficulties today still has the advantage of having enjoyed many months of rapid gains in equity as home values have appreciated across the country.
Distressed homeowners and would-be buyers have more of a safety net today than in 2008, and the economic recovery that took years to materialize a generation ago is already underway as vaccines roll out and businesses reopen.
Assuming a purchase price of $276,717 with a 3.08% interest rate and a 5% down payment, the monthly payment would be $1,558, using standard assumptions about property taxes and insurance.
Assuming a purchase price of $215,486 with a 6.29% interest rate and a 5% down payment, the monthly payment would be $1,666, using standard assumptions about property taxes and insurance.
Assuming a purchase price of $162,321 with a 3.89% interest rate and a 5% down payment, the monthly payment would be $1,052, using standard assumptions about property taxes and insurance.
She’s repeatedly said that despite the broader rotation out of high-growth companies and into value stocks, her team maintains their conviction in innovative technologies and has a five-year time horizon.“Twitter fits well with Ark and Cathie Wood’s” investment style, said Ross Mayfield, investment strategy analyst at Robert W.
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