Surging job losses in March stemming from the COVID-19 pandemic contributed to a decline in U.S. median income and housing affordability in the first quarter of 2020, according to the NAHB/Wells Fargo Housing Opportunity Index (HOI) released earlier last month.
Buying a home has historically been one the defining traditions among American residents, but over recent decades the affordability gap for buyers across the country has on average continued to stretch, and the inequalities that could deepen as a result of the coronavirus pandemic may lead to greater financial hurdles for many, at least over the coming years.
“The affordability decline is tied to the coronavirus outbreak as job losses surged and median income fell due to reduced economic activity,” said NAHB Chief Economist Robert Dietz. “However, housing demand started the year strong, interest rates are expected to stay at low levels for the foreseeable future and home prices have held remarkably stable over the past four quarters. As virus mitigation efforts show signs of success, workers will return to their jobs, and housing will help lead the economy to higher ground.” He adds.
The HOI shows that the national median home price held steady, edging up from $279,000 in the fourth quarter of 2019 to $280,000 in the first quarter. The median home price was $280,000 in the both the second and third quarter of 2019. Meanwhile, average mortgage rates fell by 17 basis points in the first quarter to 3.61% from 3.78% in the fourth quarter.
In all, 61.3% of new and existing homes sold between the beginning of January and end of March were affordable to families earning an adjusted U.S. median income of $72,900. This is down from the 63.2% of homes sold in the fourth quarter of 2019 that were affordable to households earning the median income of $75,500.
The Department of Housing and Urban Development’s (HUD) original estimates of median family income for 2020 were developed prior to the COVID-19 pandemic. To account for the pandemic’s effects, the HUD estimates were reduced consistent with NAHB’s economic forecast for 2020. As a result, the 2020 national median income estimates used in the HOI calculations ($72,900) are 7.1% lower than the initial national 2020 estimates ($78,500) from HUD.
Meanwhile Reports from a research by Tomer and Fishbane, states that after decades of shrinking, the 53 largest U.S. metro areas (over 1 million population) experienced downtown growth that was faster than their home counties. “The surge in downtown populations is an overwhelmingly positive sign for the cities and metro areas where it’s taking place,” they write, due to the increased desirability of connection to jobs, people, and attractions. But will this growth continue in the face of the coronavirus pandemic?
The researchers conclude that “the pro-urban attitudes we see sprouting across the country, there’s good reason to expect cranes will keep transforming downtown skylines and surrounding neighbourhoods for years to come.
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About the writer: Shaura Cuyan writes about all the hottest Real Estate trends and predictions for Summit VA Solutions! She has previously written for a number of freelancing gigs and writes her own blog on lifestyle and current issues. She is a Graduate of Bachelor of Arts in Communication, taking up her Masters in Development Communication.