Last week we wrote about how home ownership increased in the U.S. during the pandemic despite the economy as a whole going through a recession. This took place because Americans who did not lose their jobs found themselves with more spending money than ever because of reduced travel and personal expenses and historically low interest rates created favorable conditions for home buyers to make their move. The resulting high demand, combined with low supply, has driven home prices through the roof. This is the main downside of what happened to the housing market during COVID.
In December 2019, just before COVID-19 reached the United States, the average home in the U.S. was worth $247,000, according to Zillow. Now, that number is nearly $300,000, a roughly 20% increase. That number is stunningly high, as the 18 months prior saw an increase of only roughly 5%. This is great for those who already owned homes or who were able to jump into the market at the right time, but it has been bad for people with less income or poorer credit as the barriers to entry of the market have become exacerbated.
Simply put, it has become more difficult for people of lower income to purchase a home. The median FICO score for purchasing a home has risen, as has the lowest credit score required to secure a loan. Because of high demand but low supply for housing, the standards for who can enter the market have risen. If these trends continue, according to an Urban Institute report, home ownership will decrease over the next two decades.