Coronavirus pandemic could transform housing
Homebuyers may seek homes in suburbs
mortgages, more Americans might find homeownership has drifted out of reach.
A weak economy tends to lower homeownership rates as potential buyers opt to rent rather than take on the hefty financial commitment that accompanies buying a house.
“We’re likely to see wage declines, so the purchasing power of consumers is going to be reduced,” Dietz says.
The U.S. homeownership rate peaked during the housing frenzy leading up to the mortgage meltdown of 2008, when loans were readily available. That rate dropped sharply during the Great Recession before rebounding in recent years.
Even before the coronavirus pandemic, homebuilders were setting aside some new homes for rent, rather than for sale, in their developments. And a new breed of landlords, most notably Invitation Homes, has focused on renting suburban homes to the sort of workers who once became homeowners as soon as they got married or had kids.
Before the coronavirus, most Americans slept at home and then left for work or school. They went to the gym, to the movies, to cafes and bars and restaurants.
Now, people are spending most or all of their time at home — and finding that home suddenly feels a little cramped. A home office just got a lot more important. So did space for working out and storing stuff.
New homes have been shrinking in part because desirable land has grown scarce and also because first-time homebuyers have struggled to afford the big homes that earlier generations took for granted.
“The new homebuyer of the past decade has been the millennial, and one of the things we found was that they were willing to accept a smaller home to get on the ownership ladder,” Dietz says.
If today’s desire for more personal space turns into tomorrow’s trend, buyers will flock to bigger homes, perhaps in lower-cost cities and farther-flung suburbs.
For those who have the financial means, owning a second home suddenly looks more appealing. With New York City locked down, wealthy New Yorkers fled to their beach homes in the Hamptons, their cabins in the Poconos or their condos in Florida.
Owning a second home isn’t a cheap option: Mortgage rates on second homes typically cost more, and you will have to shoulder additional property taxes, homeowners insurance and maintenance costs.
In general, Dietz says, demand for second homes is strongly correlated to the stock market’s performance, an indicator that doesn’t portend a flurry of buyers for second homes.
But the coronavirus crisis could override the usual forces driving the market for second homes.
In typical times, a wealthy New Yorker who wanted to flee the city could rent a vacation home, snap up an Airbnb or stay at a hotel. The pandemic closed down such options.
“It’s very hard to find rentals out in the country or at the beach,” Rosenbaum says. “People are definitely going to look for a second home.”
In recent years, real estate transactions grew more virtual. The coronavirus accelerates the trend.
Even so, a real estate transaction is the ultimate hands-on experience. Before they commit, buyers want to sniff out cat pee, listen for traffic noise and immerse themselves in the sights, smells and sounds of their potential new home.
Meanwhile, buyers and sellers typically receive reams of paperwork — state disclosure forms, contracts, mortgage documents. And the process ends at a closing table surrounded by a mountain of paperwork from the participants.
The coronavirus has disrupted business as usual. In-person tours have all but halted.
Some real estate agents already had begun offering detailed virtual tours of properties, and that marketing tactic looks likely to grow more common.
While no one expects virtual tours to replace physical walk-throughs, the paper-heavy transaction process had been poised for an overhaul. In recent years, many real estate brokers and mortgage companies had moved toward a more virtual process.
Now, industry experts say, remote transactions, electronic signatures and virtual closings are poised to take off.