The Pandemic Roiled the Housing Market - but Small Signs Show It’s Finally Bouncing Back.
It’s no secret that the pandemic upended the housing market—and the fallout is still reverberating today, affecting homebuyers and sellers.
A quick recap: In the past four years, list prices shot up, the number of properties on the market plunged, and home sales dropped dramatically.
“Some of the problems that existed before the pandemic were magnified,” says Realtor.com® Chief Economist Danielle Hale. “We had a housing shortage, and that probably was exacerbated by COVID-19 as builders struggled to build and housing demand went through the roof.”
And who could forget mortgage rates, which fell to record lows during the pandemic before rebounding—and then some.
“The sharp drop in mortgage rates that we saw as policymakers tried to shore up the economy caused a lot of people to choose to move,” Hale explains. “Those movers are now locked into mortgage rates that are much lower than today’s mortgage rates.”
That’s keeping the supply of homes low—which leaves list prices high. The bad news? These issues are likely to persist longer as the market continues to settle into its new normal.
“Will we go back to a more pre-pandemic, balanced market?” asks Mark Fleming, chief economist of the title insurance company First American. “It will probably take a couple more years.”
That said, there are some signs that things are finally bouncing back: New builds are on the rise, and more homes are already being listed this spring, according to Realtor.com data. In February this year, active listings on Realtor.com were up 14.4%, and new listings were up 11.3% from a year earlier.
What else has changed in residential real estate since the world shut down four years ago?
We compared data from February 2020 to February 2024. We also looked at the annual number of existing- and new-home sales. What we found are two incredibly different homebuying and selling landscapes. Take a look at where we came from—and where we’re going.
Home prices shot up—and remain high
February 2024: $415,500
February 2020: $305,485
Percentage change: 36%
Home prices began skyrocketing fairly early in the pandemic. Many folks who were working and schooling their children from home wanted more space. Others who could suddenly work remotely wanted to move. And low mortgage rates enticed those who had been thinking of buying their first homes or trading up or down into new ones to jump into the market.
All of that heated competition led to bidding wars and previously unthinkable offers for way over the asking price. That drove prices up to record highs. List prices peaked at a median of $449,000 in June 2022, according to Realtor.com data.
“We’ve seen probably some of the strongest home price appreciation in measured history,” says Fleming. “The pace of appreciation was quite spectacular.”
However, what goes up, must come down, right? Not exactly—especially when there are still enough eager buyers in the market to keep prices high.
“It’s unlikely that prices will go back down to the pre-pandemic normal,” says Hale. But “affordability has to improve. Buying a home today takes up a much larger share of a paycheck than it has historically. That seems like a trend that can’t be sustained.”
Mortgage rates fell to record lows, but have since climbed
February 2024: 6.81%
February 2020: 4.37%
Percentage change: 55.8%
Mortgage rates have been on a wild ride these past four years.
Hovering around 4.5% in 2020, rates “were historically low,” says Shmuel Shayowitz, the president and chief lending officer at Approved Funding in River Edge, NJ.
But when the pandemic and the accompanying shutdowns began and millions of Americans lost their jobs, the Fed cut interest rates to help stimulate the economy. Mortgage rates bottomed out, falling to an unprecedented, record low averaging 2.65% for 30-year fixed loans, according to Freddie Mac.
