When the COVID-19 crisis struck, everyone predicted the worst for the economy. News about looming crashes, recessions, and depressions became an everyday occurrence. The housing market was expected to be particularly hard hit by the crisis, with predictions of a 22% decrease in home purchases for the next few months.
One can easily understand why experts expected the worst for the housing sector. People were losing jobs by the thousands, and few would have the means to sustain their livelihoods, let alone buy new houses.
However, against all the odds, home buying applications started increasing in early April. Some said that this was only a temporary situation and that sales would plummet within no time. Surprisingly, however, sales were still climbing in early May with no signs of waning any time soon. Here are the factors that predicated this unexpected increase in home buying interest among Americans.
How are Home Buying Applications Increasing Despite the Pandemic?
The 54% increase in home buying applications in early April coincided with the re-opening of many states. As soon as people were allowed the freedom to move around, many resumed the house-searching exercises that had been interrupted by lock-down measures.
Statistics also show that a fair number of those looking for new homes are seeking to relocate to the suburbs. This is because houses in the suburbs have more space than downtown apartments. They also come with amenities such as a home office and a backyard. For those who had to spend weeks locked up in a small apartment, the allure of a more spacious home is more than understandable.
A decrease in mortgage rates has also contributed to the sudden interest in home purchases. People are always looking for ways to pay less for homes, and a lower mortgage rate is indeed very enticing.
However, there has been a 0.2% drop in the number of people looking to refinance their mortgages.
There are also concerns that there might be more demand for housing than supply. This typically causes the prices of homes to skyrocket, but some forecasters feel that limited purchasing power among consumers could force realtors to set reasonable prices for their products.
Overall, the increase in home purchasing interest came as a complete surprise to many finance experts. Some, however, feel that if people are forced to stay at home again, the sales will plummet back.