Surprise! The Pandemic Didn’t Disrupt Home Values
It’s been more than a year since the U.S. real estate industry first faced a threat of unknown dimensions—the challenges posed by the COVID-19 pandemic. At first blush, it seemed likely that home sales would be disrupted for a substantial period. As buyers and sellers retreated from the health dangers that seemed to be presented by traditional open houses and property showings, it seemed probable that home values might be frozen—or worse—just as commercial activity of all kinds struggled under general prohibitions ordered by Virginia and local authorities.
But those initial predictions quickly proved questionable. Already by August, NPR could confidently headline the surprising reality: “Home Sales Booming Despite Pandemic, Recession.” Now, as summer 2021 begins, it seems improbable but true: the state of affairs in real estate is just fine—at least for sellers. The volume of sales may be declining due to the lack of willing sellers, but last week’s NBCnews.com commentary could still rightly begin with “It’s a red-hot real estate market…”
For many homeowners who had fretted about a future clouded by multiple unknowns, the rise in their home’s estimated value had been more than just comforting. More than a few have been able to use the collateral buildup to lock in bargain-basement refinancing terms. Originally, one immediate worry had been whether pandemic disruptions would trigger widespread homeowner defaults, resulting in a blanket hit to property values. The opposite happened. As ATTOM Data Systems put it, the home value story was widely positive across the nation, “despite the fallout from the pandemic.” As ATTOM’s May report detailed, equity-rich properties now outnumber seriously underwater homes by a 7-to-1 ratio. Only 4.7% of mortgaged homes are considered seriously underwater—down from last year’s 6.6%!
The reasons are straightforward. With U.S. median home prices climbing 16% year over year, “price increases have widened the gap between what homeowners owe on mortgages and the value of their properties.” Meantime, seller reluctance and building material and labor shortages have deepened the supply shortfall. As buyers scramble, rather than facing default, even some property owners experiencing a pandemic-related cash crunch have found they are able to escape damage to their credit. No matter what the current climate, the value of being able to count on an experienced real estate professional can be a real difference-maker.