Lasting Effects of COVID-19 on the National Housing Market

Written by Arnav Gupta

In recent years, marked by the infamous COVID-19 pandemic, the housing market has experienced major turbulence due to a combination of fluctuating interest rates, variations in demand and supply, among other factors.

A combination of very high demand and extremely low supply made home prices skyrocket. At the start of the pandemic, the American economy was thrown into a recession, which caused low mortgage rates (Demsas). That, combined with higher demand for real estate to house at-home workers rapidly raised housing demand. However, supply was still low. Development was happening slower if at all. These prices made it simply too expensive to purchase a home during the pandemic.

As this happened, a lot of buyers started to leave the housing market, in an attempt to wait for a cooldown. This brought mortgage rates back up, and led to many overpriced sales.

The market is now starting to shift. Buyers are starting to come back, and mortgage rates have started to go down again. These are promising signs, as stagnation in home price growth is increasing buyers’ purchasing power. However, there are some factors to be taken into consideration.

The supply of housing is still low, and even though prices are starting to go down, low supply is slowing the rate of price decline. The change in prices is largely dependent on mortgage rates.

As we go into April, the median price of existing homes is down by 0.2%, a change in pattern from 131 straight months of increases in home prices. February also saw a 9.8% increase in home starts, adding to the overall supply (Rothstein).

The main concern still revolves around overall supply of homes, which is still at a historic low. On top of that, 70% of homeowners have a mortgage rate of 4% or less, reducing the likelihood of homes being added to the resale market. 

There is no housing market crash expected, regardless of all the circulating rumors (Ostrowski). For one, housing inventory still remains very low. This means that buyers are left with little choice but to pay premiums on homes. For the most part, renting will be cheaper this year than owning a home.

Secondly, there continue to be strict lending standards. According to the Federal Reserve Bank of New York, the average credit score for mortgage borrowers in late-2022 was a high 766.

Lower-priced regions will see price hikes, while expensive areas see dips. This is due to migration out of high-priced areas during the pandemic, as the recession led to many people losing affordability in areas they were otherwise comfortable in. As a result, prices are going down in historically expensive areas, and going up in areas seeing a larger influx of residents. 

Home prices are expected to fall most in Phoenix, Stockton (CA), Las Vegas, San Diego, and Tucson (Kisell). Normally very high-priced areas, these cities saw a large portion of residents leave during the pandemic. On the other hand, prices are expected to rise the most in Scranton, Kansas City, Hartford, Harrisburg, and Omaha (Cook). Contrary to the previous examples, these are typically lower-priced areas which are seeing an influx of residents.

In regards to buying a house in the current state of the economy, it is simply a matter of budget and personal preference. If buyers are waiting for a steep crash in prices, then hopes should be lowered. However, prices will decrease overall, and prices should be monitored depending on region.

Analysts of the market are keeping a watchful eye, and are cautiously optimistic regarding the anticipated cool down. However, it is also universally agreed that prices need to see a much larger dip in order for the revival of the housing market to fully occur. 

The housing market in 2023 continues to be a complex environment. While many factors contribute to the current state of the market, including low interest rates, strong demand, and limited inventory, the effects of these factors vary widely across different regions and demographics. Affordability continues to be a significant challenge for those looking to enter the market, especially for first-time buyers.

Despite these challenges, there are still opportunities for those who are prepared to navigate the market. Investors and developers continue to play a significant role in shaping the landscape, with new construction and redevelopment projects offering potential returns.

As the market continues to evolve, it is important for consumers to stay informed and work with knowledgeable professionals to navigate the complexities of buying or selling a home. While there may be uncertainty in the short term, the long term prospects for the housing market remain positive.


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Demsas, J. (2021, February 5). Covid-19 caused a recession. So why did the housing market boom? Vox.

Ostrowski, J. (n.d.). Is The Housing Market About to Crash? Bankrate.