The effect of the coronavirus on the US housing market at the end of Q1 and the beginning of Q2 was apparent. Although many feared that real estate would not bounce back or that we would witness a full-blown housing market crash, things are already picking up. Clear signs of recovery came in the form of a spike in mortgage demand from homebuyers last week.
A Rise in Mortgage Applications
The Mortgage Bankers Association (MBA) reported a 9% week-over-week increase in mortgage applications to buy a home, according to their seasonally adjusted index. This rise is a continuing real estate market trend, with mortgage demand increasing for 6 consecutive weeks. In fact, this gain represents a 54% recovery since the major slowdown in the housing market at the beginning of April 2020. Joel Kan, an MBA economist, commented on this sign of recovery in the US housing market in the face of COVID-19:
The home purchase market continued its path to recovery as various states reopen, leading to more buyers resuming their home search. Additionally, the purchase loan amount has increased steadily in recent weeks and is now at its highest level since mid-March.
As some experts predicted, the coronavirus caused pent-up demand from homebuyers and those buyers are now entering the housing market at full-force. This is leading to good opportunities for sellers who were worried about having to hold off on sales for fear of lowering asking prices and losing out on a good return on investment.
Related: Should I Sell My House Now or After COVID-19?
Besides the pent-up demand for housing, the pandemic brought along with it low mortgage rates – one of the many expert housing market predictions coming to fruition. Mortgage rates were near record-lows at the end of last week, coinciding with the rise in mortgage applications. Although they have slightly increased since (up to 3.42% from 3.41% for a 30-year fixed-rate mortgage with conforming loan balances of $510,400 or less), general forecasts see them remaining low for 2020.
Where Are Buyers Heading?
It seems that, due to the lack of inventory in existing homes for sales, buyers are turning to new homes. Although it was forecasted that sales of newly built homes would drop by 22%, the US Census reported that new home sales actually increased by 1% for April.
In addition to this real estate market trend, it seems buyers are leaving urban areas in favor of suburban markets. This is no doubt due to the desire for more space in case of future quarantines, remote working, and homeschooling.
If you’re a real estate investor, check out the best places to buy a rental property during COVID-19.
A Temporary Rise in Mortgage Demand?
While this quick housing market recovery is a positive trend that subdues fears of a housing market crash, some experts say it will be temporary if predictions about the return of the coronavirus come true. It’s possible we are seeing the first “up” of the forecasted W-shaped US housing market recovery. If the winter real estate market brings with it a rise in coronavirus cases in the US, it’s possible another downturn will arrive and full recovery won’t be underway until 2021. Learn more by reading: Forecast: A W-Shaped US Housing Market Recovery.
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