Unemployment rates are beginning to fall, restrictions are lifting and the economy appears to be improving. The U.S. Bureau of Labor Statistics reported on Friday that unemployment rates fell to 13.3% in May, down from 14.7% in April. The housing market re-bound is partly due to people returning to work and the return of home shoppers who had paused their search in March and April.
People are also largely motivated to buy because of the still extremely low rates. This allows buyers the opportunity to afford more space, something many are itching for after months of being locked down in their homes. The Mortgage Bankers Association reported the number of mortgage applications for purchasing homes rose 8.7% year over year in the week ending May 22, and surged 17.5% in the week ending May 29.
During the last recession, home prices dropped. This one has people surprised because home prices are actually rising. According to Realtor.com, they rose 3.1% year over year in the last two weeks of May and before many city and state re-openings, home prices had been climbing by about 1.5%. So why the increase? Pre-pandemic, there was already a huge shortage of homes being listed. Once the virus started spreading around the U.S as quickly as it did, sellers yanked their homes off the market, worsening the shortage more.
Mix low inventory, high asking prices and an influx of motivated buyers and what do you get? Bidding wars. Experts are predicting the summer months to be filled with competition, so don’t try to go about the home finding process without a real estate agent highly experienced in negotiation and putting together strategic offers.
Chief Economist for Realtor.com, Danielle Hale cautions that just because unemployment was lower than expected, the economy “isn’t out of the woods” yet. Hale reports that only 10% of the jobs that were lost last month have been recovered.
Hale states that “there’s still a lot of recovery just to get back to where we were. … If this [economic] momentum continues, it could propel the housing market forward.” Hale ends by stating that the anticipated second wave of infections could cause another slow down.