Home Prices and the Covid Affect

Lily Bierce

 When you think of the pandemic and everything that was influenced by it, what do you think of first? 

The demand for masks? Hand sanitizer? Toilet paper? While these are all right, there was also another huge product that was in higher demand. The housing market saw a huge increase of prices at the end of 2021. 

Between September 2019 and September 2020, homeowners accumulated a collective $1 trillion in additional home equity. The exploding demand of the past year, in conjunction with a historically low supply of housing, has led buyers to desperately bid up the prices of available properties, sending home prices soaring. This surge affected pretty much anyone in the real estate market. 

The S&P CoreLogic Case-Shiller National Home Price NSA Index, which keeps track of single-family home purchases, shows that in November 2020 the housing prices had gone up 9.5% from the previous year. There are some factors to this, of course. When the supply of houses is lower, potential buyers tend to bid more money to greater their chance of getting the house. When the supply of houses is higher, potential buyers will tend to bid less money because they have more options. But recently, Covid has affected both the supply and demand of houses. 

Daryl Fairweather, Redfin’s chief economist, stated that she believes the increase in home values is mostly affected by demand. She said, “People are scrambling to take advantage of plummeting mortgage rates that make the cost of buying a home much cheaper. Due to falling mortgage rates, the cost of borrowing money to buy a house is dropping.” In the past couple years, mortgage rates have dropped but last year, they really fell off. In 2020, they reached a record low of 2.65%. 

In the midst of the pandemic, people were forced to stay home (as we all know), which caused most people to go a little crazy. Most people got sick of their homes and went looking to buy a new one. But since the pandemic was going on, most businesses weren’t able to produce at the rate they once did, or at all. This drove the prices up because there was so little of most things. This is what caused the demand to go up. 

All in all, the pandemic affected pretty much everything in our daily lives, including the housing market. By the demand going up, the prices for houses were driven up as well. 

Sources: 

https://www.vox.com/22264268/covid-19-housing-insecurity-housing-prices-mortgage-rates-pandemic-zoning-supply-demand 

https://www.federalreserve.gov/econres/notes/feds-notes/housing-market-tightness-during-covid-19-increased-demand-or-reduced-supply-20210708.htm