Coronavirus gives millennials rare home-buying opportunity
Some have been saving for a home since the end of the Great Recession
Americans are fleeing big cities as the COVID-19 pandemic sparks a newfound appreciation for socially-distanced space in the suburbs.
The mass migration has created an opportunity for millennials and other first-time home-buyers, in particular, to take advantage of record-low mortgage rates and work-from-home opportunities, as long as they can outbid their peers in the urban diaspora.
“It is a competitive environment among buyers,” Dr. Lawrence Yun, chief economist at the National Association of Realtors, told FOX Business. “The good news is that mortgage rates are low.”
30-YEAR FIXED MORTGAGE RATE DROPS BELOW 3% FOR FIRST TIME
A red-hot housing market despite the coronavirus downturn has left buyers with little inventory to choose from and has led to multiple bidders driving up the average home price by 5 percent nationwide, compared with last year.
However, record-low mortgage rates mean the average monthly payment for a medium-sized home has fallen 7.36 percent nonetheless -- to $1,007 in May, down from $1,087 the year prior.
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The 30-year fixed mortgage, which during the week ended July 16 dipped below 3 percent for the first time, is a “great incentive for first-time homebuyers,” Jerry Howard, CEO of the National Association of Home Builders, told FOX Business’ Stuart Varney.
There is still “pent-up demand” from millennials who have been saving up since the end of the Great Recession, Howard noted, and being “cooped up in an apartment” during the pandemic has given them an incentive to explore their options.
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While the competitive market has proved challenging for buyers trying to select the right home from a limited supply, it has provided a rare opportunity for millennials to move from city centers to places with “more inventory choices at more affordable prices,” Yun said.
The metro areas of Austin, Dallas, Houston and Phoenix give buyers the opportunity to live closer to urban centers and still pay prices within their means, according to research released last month by the National Association of Realtors. Other metro areas, including Des Moines, Indianapolis and Omaha, offer less of a big city feel at even more affordable prices.
While the window for such moves appeared as if it might be short-lived, a recent resurgence in COVID-19 cases has caused many states to slow reopenings after lockdowns meant to curb the disease's spread.
The renewal of stay-at-home orders and the expiration of mortgage forbearances might cause temporary headwinds, Yun said, but the supply shortage means prices probably won't decline even then.
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“The housing sector looks like it's in a V-shaped recovery even though the rest of the economy is not,” he said. “But we know that once housing recovers strongly, at least past historical experience shows, the rest of the economy can sort of follow that path.”