During the past year, we’ve all been hunkering down at home—leaving us ample time to think about whether our living spaces still make sense amid rapidly changing life and workstyles. Many have decided to move on, fueling what could be considered the largest homebuying boom since 2003–2004.
Both new and current homeowners are contributing to the continued increase in home sales this year, with experienced buyers leading the charge. How long will it last? Experts see some of these market changes as temporary, while others may be here to stay.
In this article, we examine three major pandemic-fueled trends worth considering as you make your home buying choice.
Trend 1: Home prices are rising
The National Association of Realtors reported that the
Low mortgage rates mean increased demand for homes
After hitting a
Fewer available properties spur bidding wars
The National Association of Realtors estimates the current market inventory at
There’s more competition, even for properties previously considered average or sub-par. Homes that might have sat on the market for months are now launching auction-like bidding activity, with amounts exceeding the asking price. Suddenly, you may find yourself in a bidding war for that fixer-upper adjacent to a six-lane highway you would have never considered a few years ago.
Such heat-of-the-moment victories can turn into losses, even if you love the house on which you outbid your competition. The most critical peril: The property you are purchasing appraises for less than you’ve agreed to pay. This leaves you with a few options: try to negotiate with the buyer, make a larger down payment or walk away from the deal.
Older owners are aging in place and further reducing inventory
For the past several years, more retirees have chosen to
The result: About
New-home construction faces continued challenges
Supply-chain issues from raw materials to appliances and furniture, including a lumber shortage, made it harder for builders to meet housing demands during the pandemic, resulting in higher prices. In November 2021, for example, the National Association of Home Builders (NAHB) reported that the average price of a new home
Families now working and relaxing together want more work and leisure space
Real estate analysts at Redfin cite a need for
Likewise, additional leisure space may be another wish-list item, thanks to the pandemic. Many homeowners have taken up new hobbies, grown accustomed to watching movies at home and entertaining smaller “pods” of friends and family—and want more space to enjoy these activities.
The pandemic has accelerated multi-generational living trends
Whether it’s parents living with their adult children or young adults returning home, the COVID-19 pandemic has brought multiple generations together in spaces that may not be able to accommodate them, even though they enjoy other aspects of the living arrangement. As home designers continue to
Trend 2: People are shopping for and buying homes in new ways
Open houses and seasonal trends have been upended, and some of the changes actually make the home buying process faster and easier.
Virtual home tours instead of in-person visits
Home sellers are reluctant to have people touring their homes, and buyers are equally unwilling to venture indoors. Enter video and virtual reality tours.
These on-screen or immersive virtual reality (VR) experiences can cut hours or even days off your home search. But while shopping with a touchpad may increase the range of homes you can see in an afternoon; you may also have to consult Google Earth to see if there’s a junkyard next to that bargain-priced mini-mansion. Or better yet, get a drone on the case (local restrictions permitting).
Digital documentation is streamlining the purchasing process
Anyone who’s ever bought a house can tell you about the endless document signing and initialing, from application to closing. But what if you e-sign those papers and have them all notarized from your desk? These already-emerging technologies have been adopted enthusiastically during the pandemic—and their convenience may keep them popular long after the COVID-19 threat subsides.
Trend 3: Qualifying for a mortgage may be more complex than before
Lenders have already been more vigilant about vetting buyers and properties after the Great Recession of 2008. And today’s erratic labor market for industries impacted by the pandemic has changed documentation requirements and standards.
As a result, qualifying for a mortgage may be different than before the pandemic. Keep these factors in mind as you prepare your finances for a mortgage application:
Credit standards are rising
Many lenders are looking for higher credit scores—at least in the 700s. Since scores change rapidly, it’s a great idea to
Lenders have tightened debt-to-income requirements since the 2008 recession
The use of
A lender is going to base its approval of your application on your income, debt, credit and assets. However, your lender may not know the details of your current lifestyle and spending habits. So, it’s up to you to decide if you want to forego the lake house every summer or your new car purchase every two years. Without a plan, it’s easy to become “house poor” and unable to enjoy a balanced financial life.
Get professional guidance
The many challenges of COVID-19 have spurred some welcome changes in the homebuying process. What hasn’t changed are the personal financial criteria you need to consider before making a major purchase. Use
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