This article was first published on NerdWallet.com.
The COVID-19 pandemic has touched all phases of the homebuying journey. Today’s first-time home buyers find themselves flailing in cross-currents:
- Fearing health risks, homeowners have delayed putting their homes up for sale, limiting supply.
- All-time low mortgage rates have encouraged even more buyers to leap into a fiercely competitive market.
- Meanwhile, tighter mortgage standards make it a bit harder for even well-prepared buyers to get loans.
- Average home prices rise higher, faster — beyond the affordable range for first-timers.
These public health and market forces are amplifying affordability issues for first-time home buyers, threatening to delay their dreams of homeownership. To find success, prospective buyers must be persistent, patient and preapproved.
Sellers slam their doors on buyers
Just as the spring homebuying season was gearing up, word came that the novel coronavirus could spread from person to person. Rather than risk exposure, would-be sellers withheld their homes from the market. "People pulled back because they didn't want people in their homes," says Terri Robinson, a Realtor with RE/MAX Select Properties in Ashburn, Virginia.
As sellers sidelined themselves, the inventory of homes for sale stayed relatively flat instead of zooming upward. In June, 1.54 million existing homes were for sale, a 20% drop from the housing inventory a year before, according to the National Association of Realtors.
A skimpy inventory isn't a problem when demand for homes is low. But even in the pandemic's early days, home buyers outnumbered willing sellers — and the Federal Reserve was about to motivate even more people to go house shopping.