Written By: Alisha Patel
When the global pandemic hit the United States in March of 2020, the residential housing market was heavily impacted. The residential housing market includes condominiums, townhomes, and houses. Families were upgrading to larger homes in the suburbs, as they were taking advantage of record low mortgage rates. In addition, the low mortgage rates motivated young adults to invest in actual houses instead of renting houses or apartments. The implementation of stay-at-home orders compelled people to work from home. This also influenced them to buy a better home to work from. As we near the end of the pandemic, we can follow the fluctuations in home sales through 2020 and 2021.
Data and Methodology
To study the effect of the pandemic on housing prices, we collected data from two counties/cities of various population density. It is important to collect data from areas with different populations. This enables a researcher to determine if a trend is unique to one area. We then studied the distinct economic factors in specific cities. From that, we can estimate the degree to which stay-at-home orders and interest rate cuts explain buyer behavior. We investigated whether these factors influenced people to purchase homes with more accommodations that suit the change in lifestyle.
Miami-Dade County, Florida
Miami-Dade County in Florida is home to one of the largest and most popular real estate markets in the southeast. Over 2.71 million residents call this area home. The real estate market in Miami-Dade County is particularly popular due to the many attractions and beachfront views.
We found that low interest rates, along with high demand caused a massive surge in home sales in October 2020 (Miami-Dade). In October 2020, sales of luxury homes priced between $400K to $600K increased by 52.5%. Single-family homes priced $1,000,000 and up increased by 122% (Miami-Dade, 2020). This trend continued into 2021. Total home sales jumped 33.5% in February 2021 (Miami-Dade, 2021). The increase in demand for single family homes in Miami-Dade County has caused a shortage of homes.
This shortage will hopefully be eliminated through more properties being listed and newer homes being built. It is unknown if mortgage rates will remain low enough for homebuyers to hold their demand for houses in Miami-Dade County. If they do, the residential market in Miami- Dade County will continue to expand.
Huntsville, Alabama is a mid-sized city in North Alabama. It has a population of 196,219 residents, and is known for its advances in technology and aerospace. Home prices in Huntsville have maintained a steady increase over the last few years. When COVID-19 hit, residents were looking for more affordable housing due to pay cuts, layoffs, and stay-at-home mandates. Home sales increased 28.7% from September 2019 to October 2020 (Wintzell 2020). Home sales continued to grow 4% more from 2020 to 2021 (Rohde, 2021). If mortgage rates remain low and buyer demand remains high, Huntsville’s residential market should continue to grow throughout 2021 and even 2022.
Based on the data from Miami-Dade County and Huntsville Alabama, it appears that COVID-19 did affect the residential housing market. As more people began working from home, the demand to purchase a home increased. This increase in demand directly contributed to the increase in home sales in both areas. We should continue to keep track of the market growth as COVID-19 progresses into 2022. Specifically, financial services professionals should be watching buyer demand. As some workers return to offices many companies are announcing long-term remote work policies. This changing demand pattern has the potential to impact the housing market for many months. This will have an impact on prospective homeowners and how we might advise them to prepare for a home purchase.
“Miami-Dade Total Home Sales Continue Surging in October: Miami-Dade County Total Home Sales Surged in October 2020 as Strong Pent-Up Demand and Record-Low Mortgage Rates Fueled Transactions, According to the MIAMI Association of Realtors (MIAMI) and the Multiple Listing Service (MLS) System.” PR Newswire Nov 19 2020 ProQuest. 10 Oct. 2021 .
“Miami-Dade Total Home Sales Continue Surging in February 2021; Luxury Home Sales Jump Year-Over-Year: Miami-Dade County Total Home Sales Posted a Double-Digit Increase for the Sixth Consecutive Month in February 2021 as Pent-Up Demand and Record-Low Mortgage Rates Continue Fueling Transactions, According to the MIAMI Association of Realtors (MIAMI) and the Multiple Listing Service (MLS) System.” PR Newswire Mar 22 2021 ProQuest. 10 Oct. 2021 .
Rohde, Jeff. “The Huntsville Real Estate Market: Stats and Trends for 2021.” Learn Real Estate Investing, Roofstock Inc., 15 Sept. 2021, learn.roofstock.com/blog/huntsville-real-estate- market.
Wintzell, Gus. “Huntsville Housing Sales Up 28% Over Year Ago; Inventory Continues to Dwindle.” Huntsville Business Journal, 22 Oct. 2020, huntsvillebusinessjournal.com/lead/2020/10/22/huntsville-housing-sales-up-28-over-year- ago-inventory-continues-to-dwindle/