After dominating lives around the world for a few years, the COVID-19 pandemic has largely slipped off the radar for most of us. But its legacy lives on in many places, including the U.S. housing market.
The pandemic set forces in motion that significantly changed how Americans buy and sell homes. As a result, housing trends and the transaction process itself today look quite different from how they did in 2019.
Here are some ways that home shopping and selling has radically changed since COVID-19.
1. Affordability has disappeared
Shortly before COVID-19 arrived, Americans looking for affordable homes had a fighting chance of finding them.
For starters, American pocketbooks were fatter. In 2019, wages in the U.S. had soared to a “historically high level,” according to the World Economic Forum. Average hourly earnings in March of that year matched a peak set in March 1974 after wages were adjusted in 2019 dollars.
Interest rates were also low, making mortgages less costly.
But the coronavirus changed everything. Its arrival ground life to a halt, forcing people to remain largely locked down in their homes for a period. When pandemic-weary citizens eventually re-emerged from this unwelcome exile, those shopping for homes found a new — and less hospitable — marketplace.
During the peak years of the COVID-19 crisis, housing prices boomed. One study found that home prices in the Mid-Atlantic region of the country rose 40% between 2020 and 2022. That was a faster pace of growth than occurred during the housing bubble of 2005-2007.
And things have just gotten worse since then. The surging inflation of the post-pandemic era has made it harder for folks to get by, let alone save for a down payment. Soaring mortgage rates have also helped shove millions of aspiring homebuyers out into the cold.
Unfortunately, there is no significant relief in sight for those dreaming of a return to affordability. Frustration over elevated home prices is one reason that more than three-quarters of Americans of all ages cited housing affordability as a major issue in this year’s election.
2. Where Americans want to buy homes has shifted
During the pandemic’s first two years, 2 million Americans left urban areas to seek homes in the suburbs and small towns, according to a report from the Economic Innovation Group.
In addition, states such as Texas and Florida became magnets for new residents. Formerly under-the-radar places — such as Boise, Idaho, and Austin, Texas — also saw an influx of transplants.
Meanwhile, states such as California, New York and Illinois lost residents in big numbers.
All of this was made possible by society’s shift to remote work as a response to the threat of COVID-19. Suddenly, people were not tied down to living in the same city as their employer.
Initially, many observers thought that working from home would be a temporary arrangement and that workers would happily return to offices once the pandemic subsided.
But by and large, that has not happened. A 2023 study from the Pew Research Center found that 35% of workers who have jobs that can be performed remotely now work from home all the time.
One survey found that a jaw-dropping 98% of workers would prefer to work from home at least part of the time.
3. More than ever, cash has become king
The irony of today’s housing market is that while millions of people can no longer afford a mortgage, a growing number of buyers are wealthy enough to feel comfortable dipping deep into their pockets and skipping a home loan altogether.
In September, 30% of home sales were all-cash deals, according to Realtor.com. That number jumped to more than 41% in the first quarter of 2024, real estate data provider ATTOM reports. By contrast, just 20% of sales prior to the pandemic were all-cash deals.
Today’s high mortgage rates likely are driving some buyers to skip financing so they can avoid having to take out an expensive home loan. But this strategy is a nonstarter for most Americans.
Buyers willing to pay for a home in cash are often more attractive to sellers, as they don’t face the hassle of waiting for lender approvals. That fact simply adds to the woes of millions of potential homebuyers who feel shut out of the process.
4. Loan underwriting is now much faster
When COVID-19 struck, sellers, real estate agents and lenders suddenly had to get creative to sell homes in an environment where face-to-face interactions disappeared overnight amid the threat of an airborne-spread disease.
So, the housing industry turned to technology. As more lenders embraced automated loan underwriting, the process sped up. Bankrate reports that prior to the pandemic, for instance, it took around three weeks to get an appraisal back.
Now, it takes about a week.
5. Investment firms have made homes harder to find
Shifting market conditions often create new opportunities to make easy money. When that happens, well-heeled folks quickly pounce to take advantage.
As home prices soared during the pandemic, investors looking to capitalize on the situation began to snatch up properties from coast to coast. At its peak in December 2022, this trend resulted in more than one-quarter — 28.7% — of all home sales going to investors.
By the first quarter of 2024, that number had dipped to 14.8%. But the fact that investors — including big Wall Street firms — have bought up so much housing stock in recent years has made it even more difficult for average Joes and Janes to find the home of their dreams.
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