Was the boom in home sales that came during the pandemic due to homebuyers having greater financial wherewithal – or was it driven more by their desire to move out of the cities and into detached homes in the suburbs – in an effort to outrun the virus?
It’s an interesting question and one that is explored in a new research paper from Fannie Mae.
Surprisingly, Fannie Mae’s research shows that low interest rates and greater financial wherewithal were the primary factors that drove the home sales boom that started in March 2020 and lasted to the end of 2021 – while the desire to flee the urban centers for more open spaces was a secondary factor.
The research arrives at the conclusion that low interest rates and financial wherewithal have an even greater impact on homebuyer decision-making than previously thought: In the case of the pandemic, those factors even trumped the desire to escape the virus and “isolate” in the suburbs.
In the survey, Fannie Mae asked homebuyers who bought a home during that period if the pandemic itself accelerated their home purchase timeline. Among first-time homebuyers, 29% said it accelerated their home purchase decision, compared to only 13% of repeat homebuyers.
Meanwhile, 56% said the pandemic neither accelerated nor slowed their timeline.
Comparatively, 48% of homebuyers said low interest rates accelerated their home purchase during that period.
“The survey findings illustrate the primacy of financial considerations over the benefits of physical space in influencing homebuying behavior during the pandemic,” the report states. “Consistent with our research prior to the pandemic, the general public’s belief that ‘owning makes more financial sense than renting’ remains a major motivational driver for homeownership.”
Photo: Tom Rumble