In 2020, the United States economy experienced its largest contraction since the first year after World War II. The unemployment rate nearly doubled over the course of the year, and the stock market plummeted to less than two-thirds of its current value. Despite all of this, the number of homeowners in the U.S. increased by over 2 million, the largest spike since 2004 and seventh largest percentage increase since 1965. Furthermore, 2020’s homeownership rate of 65.8% was the country’s highest since 2012. How can this be?
This occurred for a number of reasons. One is that pandemic job losses were particularly common for low-wage earning employees. According to Pew Research, “the percentage decrease in employment in low-wage occupations was more than twice as great as in middle-wage occupations (-12.5% vs. -5.3%)”, and at the same time employment in high-wage occupations actually increased. Since low wage earners are far more likely to rent than to buy, many of the COVID-related job losses did not drag down demand in the buyer’s market. Interest rates hitting record lows made it easier for those who were in the market to commit to mortgages and purchase homes.
Additionally, Americans in the buyer’s market had more money in their pockets in 2020 than ever before. Household incomes were at a record high before the pandemic, as the U.S. median adjusted household income was over $80,000 in 2018, and a widespread lack of spending due to COVID shutdowns equated a 10% across the board tax cut, meaning that home buyer’s budgets experience unexpected increases.
Lastly, those who owned homes prior to COVID but faced financial uncertainty during the crisis were aided by foreclosure moratoriums, which have prevented many from having to lose their homes.
Source: Pew Research