When COVID-19 started to shutter businesses and send people home in March 2020, many real estate experts thought the market would go cold in the face of financial uncertainty. As we know now, the exact opposite happened. As unsure sellers pulled their properties off the market, buyers eager to get out of big cities and into homes with at-home work spaces were left to fight over the few houses on the market. Buyers motivated by some of the lowest interest rates in history found themselves competing with multiple other offers and housing prices shot up. Now that the delta variant is hitting many parts of the US, how can we expect the NJ housing market to react?
It may be too early to tell for sure. We have seen the CDC announce a return to masking in many parts of the country as well as general economic uncertainty and volatile financial markets. Housing experts are debating whether the delta variant will have a big impact on the market or none at all. Here are some things to consider:
1. Mortgage Interest Rates Falling Again
Just like we saw at the beginning of the pandemic, financial uncertainty has led to mortgage interest rates falling once again. This was a huge incentive for buyers to get out and house search even through the uncertainty of a pandemic and worldwide financial unrest. Real estate experts expect to see a similar wave of buyers this time. The week ending July 22nd saw interest rates drop down to 2.78% for 30 year fixed-rate loans. If the pandemic worsens, as is predicted with the delta variant, mortgage rates should stay pretty low.
2. Home Prices are Still High—and Could Get Higher
If low interest rates are enticing more buyers to enter the market, this could exacerbate already high home prices. The average home price in New Jersey hit $419,636 as of July 2021. While many buyers will be looking to save money through low interest rates, such a competitive market could lead to bidding wars and homes selling far above list price. This can cause housing prices to skyrocket just as they have over the last year.
3. Delta Could Slow the Return to Big Cities
Many individuals and families fled big cities in the beginning of the pandemic for the security of less populated suburbs. There has been a growing trickle of these people moving back into the city, perhaps realizing suburbia is not for them and seeking to get back into city life. But if businesses close again and big cities face lockdown, it could cause hesitation about moving back into bigger cities. This could create an uneven market where homes for sale in urban areas sit on the market, while rural and suburban properties remain scarce.
4. People Aren't as Fearful This Time
The biggest factor to many people's real estate decisions at the beginning of the pandemic was fear of the unknown. Now, nearly a year and a half into the pandemic, we know what it means to live through a worldwide pandemic. The uncertainties that kept many people from exploring their real estate options previously may not factor in as much this time around. Because of this, most real estate experts are not predicting any significant changes to the market with the introduction of the delta variant, but only time will tell.