August 21, 2020 | Market Update

Market News 8-21-2020

Mortgage Market Update

Rural Home Prices Jump

The Coronavirus pandemic seems to be pushing homeowners from cities into rural and suburb areas. According to a July study by Redfin, before the pandemic 9% of homebuyers said they were looking for a home in rural areas. However, as the pandemic stretches into its 6th month in the U.S., 19% now say they are considering more rural options. Redfin Economist Taylor Marr notes, “Now we’re seeing concrete evidence that rural and suburban neighborhoods are more attractive to homebuyers than the city, partly because working from home means commute times are no longer a major factor for some people.” This increase in demand has driven up home prices in rural areas by 11.3% Y-o-Y and 9.2% in suburban areas.2

New Construction on the Rise

New construction of both single-family and multifamily homes jumped in July – up 23% Y-o-Y. This is almost back to pre-pandemic levels from the first quarter. The rise in multifamily units may lead to an oversupply of apartment buildings, especially in cities as consumers are looking to move to suburban and rural areas. This oversupply could lead to sluggish apartment rent growth moving forward. However, the rise in new single-family units is beneficial as inventory remains low – down 19% from a year ago. Inventory shortages should be expected for the rest of 2020 and if these trends continue, there may be a more balanced market in 2021.3

Sources: 2HousingWire, 3National Association of Realtors