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Summary: As the country works through the coronavirus pandemic and its effect on the economy, how will the real estate market fare? More specifically, will there be more new home construction this year and next? This article will attempt to answer that question.
After months of being stuck abiding by stay-at-home orders and physical distancing requirements because of the COVID-19 crisis, Americans are ready to move on and go back to some type of normalcy. Businesses that have been shuttered and jobs that have been lost have also had a grave effect on people and the economy. But as the economy finally starts to reopen slowly, many wonder if it will ever go back to where it was pre-coronavirus, and if so, when.
COVID-19’s Effect on the Real Estate Market
Real estate was one of many industries that were impacted by the coronavirus pandemic, though not nearly as bad as sectors like hospitality and travel. Even though buyers and sellers retreated for a while out of fear of the virus’ spread, things seem to be picking up. All that pent-up buyer demand seems to be releasing as of late, as buyers enter the market in search of a new home to buy.
Sure, the landscape of buying and selling homes has changed somewhat. For example, buyers may be asked to enter a showing or open house one at a time or to wear a mask. But that doesn’t seem to be hampering the market too much. While numbers could certainly be stronger, the real estate market across the US is showing some signs of strength.
Renewed Interest in Home Buying
According to recent Case-Shiller’s National Home Price Index, home prices in April rose slightly by 0.10% to a year-over-year average of 4.70%. The 20-City Home Price Index showed a home price growth rate of 0.10% to 4.00% year-over-year. That’s not too bad considering the situation the economy has been in.
Even better news comes from the National Association of Home Builders (NAHB), which recorded a jump in new home sales in May. A renewed interest in housing comes as mortgage interest rates remain historically low, making getting a mortgage much more affordable.
Increase in New Home Builder Confidence
New home builder confidence is also increasing, which may result in a slew of newly constructed homes available on the market. More specifically, builder confidence in the realm of newly-built single-family homes spiked to 58 in June, an increase of 21 points, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). Reading over 50 points to a positive market.
There has been an increase in demand among buyers for single-family homes in suburban areas with more sparse populations. They’ve realized that being cooped up in a condo or not having much outdoor space to roam free a safe distance away from others is a real nuisance, which has been brought to life following the COVID-19 pandemic. As such, builder confidence has increased accordingly.
Building permits are also increasing, providing yet another sign that build confidence is among along with an increase in buyer demand. According to the US Census’ Monthly New Residential Construction Report, building permits for new home construction jumped by 14.4% from April to May. At the same time, housing starts also increased by 4.3%.
Wil Markets Pick up in WA, ID, OR, and CO in 2020 and 2021?
It’s tough to tell what the markets in Washington, Idaho, Colorado, and Oregon will do over the next year, but up until now, they’ve done pretty well. In fact, some markets are still considered very hot.
The average home price in Washington currently stands at $428,800. That’s a 6.6% increase from the same time last year. Zillow characterizes the housing market in Washington as “very hot” right now, and perhaps things will remain that way going forward with renewed homebuyer demand.
In the state of Oregon, the average home price is now $372,800 after having increased 3.5% from the same month in 2019. According to Zillow, Oregon’s real estate market is considered warm.
The average home price in Idaho is $298,200. That marks a 9.5% increase from July 2020, making this particular housing market a very hot one.
Colorado’s average home price is currently $408,700. Prices have increased by 3.1% over the past 12 months. Zillow characterizes the market as cool.
A Promising New Trend?
Building and permits and housing starts are lower now than they were at the same time last year for obvious reasons. But the trend upward is promising, which should have a positive influence on the US economy as a whole. And considering the dire housing inventory situation across the country, new housing construction will provide some much-needed relief and access to homes for buyers on the prowl for a new home.
Mortgage applications are also on the rise. That, coupled with low interest rates and increased builder confidence paints the picture of a bright future for real estate.
Ready to Apply For a Mortgage?
Are you considering buying a home this year? Sammamish Mortgage can help. We are a local mortgage company serving the broader Pacific Northwest region, including Washington state, Idaho, Colorado, and Oregon. We are proud to offer a wide variety of mortgage programs and products with flexible qualification criteria. Please contact us if you have any questions or are ready to start the mortgage application process.