An estimated 3 million people bought homes since the beginning of the pandemic.
Lower interest rates contributed to the buying spree.
Now that rates are on the rise, we may see the market cool down accordingly.
Surprisingly, despite layoffs and an economic recession, the number of Americans who own a home has increased dramatically since the pandemic. What caused this buying spree, and can we expect it to continue?
How many Americans bought homes during the pandemic?
As of August 2022, according to the latest housing inventory data available from the Federal Reserve Bank of Saint Louis, there were approximately 84.2 million owner-occupied housing units in the United States. That number is up from approximately 81.2 million in the first quarter of 2020.
Those numbers suggest that there are around 3 million more homeowners in America now than at the beginning of the pandemic.
What’s behind the buying spree?
The surge in homeownership can be partly attributed to the lower interest rates that followed the COVID-19 recession.
As pandemic fears mounted, many businesses were forced to close or lay off workers, investors pulled money out of their investments, and consumers spent less. So as part of its attempt to stabilize the economy, the Federal Reserve began lowering interest rates, which helped make borrowing and spending more affordable.
With interest rates at historic lows, more people could afford to buy a home. Even with nationwide-low inventory levels and fierce competition for available properties, some folks could afford to pay record-high home prices.
What kind of buying behavior can we expect in the future?
As home prices continued to soar through 2021 and inflation fears set in, the Federal Reserve began raising rates to curb inflation. To date, the Federal Reserve has imposed 4 rate hikes this year with more expected in the coming months. As interest rates climb, owning a home is becoming less affordable for many people. Some are shopping for homes at a lower price point while others are exiting the market entirely.
It’s difficult to forecast where rates may go in the coming years. But in the near future, they’ll likely continue to trend upward which may make the red-hot real estate market we’ve seen over the last few years start to cool down.
This content is meant for informational purposes only and is not intended to be construed as financial, tax, legal, or insurance advice. Opendoor always encourages you to reach out to an advisor regarding your own situation.