Changes in Economy and Real Estate Markets Impact Home Buyer Preferences Post-COVID
With over 14.7 million coronavirus cases world-wide, the current pandemic has left an indelible mark on global health, social and economic trends. In the United States, the pandemic led to a government-imposed quarantine, which has precipitated the economy’s slide into a recession, a jump in unemployment and a shift in consumer preferences.
As states moved toward re-opening business activity in June, realtor.com in partnership with HarrisX asked a nationally-representative sample of consumers looking for a home how their real estate conditions and preferences have changed. The data reveal a dynamic landscape, where people are rethinking the role of home in an era of expanded remote work, home schooling, historically low mortgage rates and a still-uncertain health and economic outlook.
Consumers Remain Optimistic About Home Buying in the Current Environment
As evidenced by the strong rebound in home buying activity, and the accompanying declines in inventory, consumers have returned to real estate markets. While the pandemic has impacted the broader economy, real estate has retained its resilience. When asked about their opinion of home buying during this period, 55 percent of consumers indicated that they were more optimistic, while 33 percent mentioned that coronavirus had no impact.
The responses showed some variation when viewed through a demographic lens. While both genders were predominantly optimistic about home buying, men were more so (58%) compared with women (51%). Interestingly, respondents’ ages showed a more pronounced nuance, with younger respondents—aged 18-34—showing a larger share of optimism compared with older age groups. A larger share of urban consumers was optimistic about buying a home in the current environment versus their suburban or rural counterparts. Income played a role in consumer optimism, with those reporting yearly household incomes over $100,000 having the highest share of optimistic responses. However, the responses remained mostly optimistic even when sliding lower on the income scale. The figures point to the fact that home ownership remains an important component of the American Dream, even during times of turbulence.
COVID-19 Moved Consumer Timelines toward Buying Sooner
The coronavirus pandemic and ensuing changes have impacted timing for many home shoppers. While 44 percent of survey respondents indicated that they have not changed their plans, 41 percent mentioned that they were looking to buy sooner than initially planned.
The survey results varied across demographic factors. A larger share of men—46 percent—indicated that their plans were accelerated, compared with 36 percent of women. At the same time, a larger proportion of younger buyers had moved up their plans, with 47 percent of those aged 18-34 providing an affirmative answer. In comparison, 45 percent of respondents in the 35-49 age group were looking to buy sooner. For respondents over 50 years of age, less than a quarter had moved up their timelines. The locale and income of consumers also made a difference in timing, with more urban buyers and those with higher incomes showing an acceleration in buying schedules.
Majority of Buyers Changed the Desired Price during the Home Search
The pandemic and ensuing changes in the economy have also impacted home shoppers pricing decisions. With rising unemployment and economic uncertainty, some buyers have been shifting their search toward lower priced homes. For others, record low mortgage rates and a desire for larger homes have spurred a shift toward higher priced homes. While 37 percent of shoppers indicated that they did not change their target price since they started their search, 38 percent stated that they were looking for higher priced homes and 25 percent moved toward lower price homes.
Along demographic lines, larger share of men switched toward more expensive homes, as did younger buyers. Also, a larger share of urban buyers and those with yearly household incomes above $75,000 indicated a change toward higher-priced homes.
Larger Homes and Better Neighborhoods Motivated Buyers to Look for Higher Priced Homes
For the 38 percent of consumers who shifted toward higher-priced homes, the desire for a better neighborhood and a larger home was the main motivator. Demographically, the responses offered a few interesting insights. Men were looking for a better neighborhood, while women found the shortage of home features in their initial price range inadequate. For younger buyers, larger homes and better neighborhoods ranked higher, while for older buyers, home features were the main drivers of a move up in price. Home features and neighborhood considerations also played an important role across income and location characteristics.
Additional Savings, Financial Security Concerns, and Economy Motivated Buyers to Look for Lower-Priced Homes
Among the 25 percent of home buyers who changed their search toward lower-priced homes, the main motivators were the desire to “have more savings available, just in case,” as well as worry about financial security. General economic conditions also played an important role in the decision.
These main factors were consistent across gender, locale and income. Older buyers (over 50) were more concerned about the prevailing economic conditions, while younger buyers (under 50) wanted the peace of mind the additional savings would provide.
Lower Mortgage Rates Help Buyers Reach for Larger, Higher-Priced Homes
Financing has been one of the main factors impacting consumers’ approach to housing this year. Mortgage rates have been declining since the beginning of the year, but they took a sharp downward turn during the pandemic, breaking new records during the summer, as they moved into sub-3.0 percent territory. For 62 percent of survey respondents mortgage rates have stayed the same or declined during the pandemic.
Lower rates have boosted home buyers on several fronts, allowing them to look for larger or more expensive homes, in nicer neighborhoods, or providing savings on a monthly budget. Along these lines, 15 percent of consumers who answered a question about mortgage rates’ impact on their home search indicated that they were able to look for a larger home. Similarly, 14 percent pointed out that they could look in a nicer neighborhood, while an equal share (13%) answered that they could “look for a more expensive home,” “decrease my monthly mortgage budget,” and “consider homes that are move-in ready.” The figures underscore the importance that mortgage financing plays in the housing market, as well as the impact historically low rates have in stabilizing real estate markets during this period.
Favorable mortgage rates were a positive factor for consumers across demographic groups, with a few nuances. Both men and women ranked the ability to look for a larger home in a nicer neighborhood as an important factor. Across age cohorts, younger buyers indicated a similar boost from low rates. However, more consumers over the age of 50 viewed the reduction in their monthly budgets as a main benefit of lower mortgage rates. Income brackets offered similar insights, with consumers in lower household incomes seeing the benefits of low rates in their ability to seek nicer neighborhoods, large homes or the ability to put a lower down payment on a house.
Sheltering At Home Helped Consumers Save More Money for a Down Payment
The pandemic and ensuing quarantine seemed to have offered a few silver linings for consumers’ finances. One of those was the increase in savings spurred by sheltering at home. A majority of survey respondents indicated that they were able to save more money for a down payment while in quarantine. The answers were fairly consistent across demographic groups, with a few differences. A larger share of younger consumers reported saving more money, along with a larger share of households reporting larger incomes.
Consumers Were More Willing to Commute Longer Distances Post-Pandemic
As we learned in an earlier survey this year, the pandemic has shifted consumers’ housing preferences, shining a brighter spotlight on quality-of-life aspects. Quiet neighborhoods, larger homes, access to nature and the outdoors and proximity to amenities ranked higher. In keeping with these changes, respondents to this summer’s survey indicated that they are more willing to spend longer times commuting to work in a post-pandemic era. While 52 percent stated that they expected no impact on commute times, 36 percent indicated that they were more willing to either commute longer or live farther from work.
Demographically, more men (42%) indicated a willingness for longer commutes than women (30%). Meanwhile, younger consumers and those in urban areas were also more willing to look for homes farther away from their places of work. Household income also played a role, with a larger share of higher-income respondents showing a willingness to commute longer distances.
Main Home Characteristics Remain Constant for Shoppers in 2020
While the coronavirus pandemic has clearly left an impact on some consumer preferences, what buyers are looking for in a home illustrates enduring values. For most buyers, price range, number of bedrooms and bathrooms, a renovated kitchen and a large backyard, along with a garage are the primary home features which have not changed during the pandemic. We asked a similar, nationally-representative sample of consumers the same questions in early March of this year, and based on those responses and the ones from the summer survey, we were able to compare how preferences changed. Both surveys found that the vast majority of buyers—65 percent—are seeking homes priced under $350,000. Moreover, garages retained their top ranking as the most important feature for buyers in both the early spring and summer surveys. A renovated kitchen and large backyard space ranked in the top five features people want in both surveys.
Below are the pre- and post-COVID responses by category.
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