For Realtor James Dietsche, there is only one way to describe the real estate market right now: “It’s insane."
A 1950s style three-bedroom home he listed in late June for $200,000 in a small town outside Harrisburg, Pa., received 26 offers the initial weekend it was for sale. Many buyers were young couples seeking a starter home and retirees looking to downsize. But bids also came from Philadelphia, New York City and the Washington, D.C., area. One person was willing to pay up to $50,000 above asking. Several were offering to buy it without inspections.
While Dietsche’s cellphone has been ringing with eager buyers, Tammy Steen’s phone has been buzzing for a different reason. Her landlord keeps calling demanding the $700 rent she does not have. Steen, 52, was a hotel housekeeper at a Hampton Inn in Pensacola, Fla. Her temporary layoff now looks permanent. She has yet to receive unemployment aid despite applying in late March. She has applied to countless fast food, retail and maid jobs but has not been hired. She has started selling hot dogs on the side of the road to beachgoers, praying she does not become homeless.
The coronavirus pandemic is exacerbating inequities across America, especially in housing. This summer is one of the best times for home buyers and worst for many renters. Americans with money in the bank are buying bigger homes, while renters increasingly worry about eviction.
Homes sold nationwide in April, May and June at annualized rate of 15 million, according to seasonally-adjusted data released last week by the Commerce Department and National Association of Realtors. Meanwhile, 12.6 million renters say they were unable to pay rent last month, according to the latest Household Pulse survey from the U.S. Census.
Homes sales are booming, because Americans who have savings, stable jobs and good credit scores are taking advantage of the cheapest mortgage rates on record to bargain shop for larger homes. New mortgage applications just hit a level not seen since 2008. Sales of previously owned homes, like the one Dietsche listed in central Pennsylvania, surged a record-setting 20.7 percent in June. Sales of new homes jumped 13.8 percent last month, well above experts’ forecasts.
“People are literally trying to get back to a house in the suburbs with a yard and a fence. Those are the houses that are blown off the market in two seconds,” said Dietsche, a Realtor at House 4 U Real Estate in Dillsburg, Pa.
On the flip side, the worst downturn since the Great Depression has hit low-income workers — who are typically renters — the hardest. Sixty percent of renter households have had at least one person in the home suffer a job or pay cut versus 45 percent of homeowner households, Census survey data from July 9-14 show. Evictions are widely expected to spike soon. Stout Risius Ross, a consulting and investment banking firm, predicts nearly 12 million eviction filings by October.
“Whatever savings I had built up, it all went on rent or else I’d be living outside. My light and water are about to be cut off. I’m trying to work on keeping them on,” said Steen, as she helped sell hot dogs on a road heading to the beach. “I’m just afraid to go back to Pensacola Beach, but I have to make some kind of money.”
Renters are rapidly losing the few lifelines they had during the pandemic. A federal government moratorium that protected millions of renters from being evicted expired on Friday. The extra $600 a week in unemployment aid many laid off workers had been getting ended over the weekend. Congress has yet to agree on an extension, a worry as Aug. 1 rent payments loom.
“This crisis really does have the potential to exacerbate housing inequality. Really low mortgage rates are providing an extra $100 to $300 of saved monthly housing costs for people who are able to buy a home right now or millions of homeowners who have been refinancing,” said Jeff Tucker, an economist at housing site Zillow. “But it’s no help to renters or people who were laid off and are now locked out of the mortgage market.”
The median listing price for a home for sale in the United States is now $340,000, according to Zillow data, up about 5 percent from a year ago and an indication of strong demand and few homes on the market.
Realtors, economists and home buyers say the surge in home purchases is driven by three factors: the cheapest mortgages ever, Millennials hitting their 30s and wanting to settle down and city-dwellers suddenly wanting more – and less expensive – space as the pandemic forces families to spend more time at home.
In the Harrisburg area, prices are up 10 percent, Zillow found. Dietsche, who is also a mail carrier, says he has been delivering a lot of forwarded mail for people relocating from major cities. Some are deciding to stay, figuring they can travel a day or two a week to a big city, if needed. In the Hamptons, a wealthy beach community outside New York City, prices are up 25 percent as the rich do their own version of distancing, according to a report from Miller Samuel and Douglas Elliman.
In March, the Federal Reserve slashed interest rates to zero and started buying tons of bonds, including mortgage-backed securities. These actions helped trigger two of the biggest comebacks so far in the economy: a surge in stock prices and a surge in home-buying.
The popular 30-year fixed mortgage recently fell below 3 percent for the first time since Freddie Mac began tracking mortgage rates in 1971. That makes homes more affordable. A $340,000 home would have cost about $1,260 a month a year ago when the typical mortgage rate was 3.75 percent. Today it costs $1,140.
“America’s houses — if you can find one — are on sale, literally, from unprecedentedly low mortgage rates,” said Susan Wachter, a Wharton real estate professor and co-director of the Penn Institute for Urban Research at the University of Pennsylvania.
The result is mortgage applications for home purchases are up nearly 20 percent from a year ago to the highest level in over a decade, according to the Mortgage Bankers Association. Refinancing is even hotter, up more than 120 percent from a year ago. Homeowners have been able to refinance to save money or take equity out of their home if they need a cash lifeline, something renters cannot do.
Realtors and housing experts say they are also seeing another factor at play driving home sales: demographics. The median age of a first-time home buyer is 33 or 34 years old. Right now a bulge of Millennials are turning 30 and starting to think about home-buying seriously — if they have the savings to do it.
There is some concern that such a hot housing market echoes the 2008-09 financial crises where millions bought homes they really could not afford and lost them in a painful wave of foreclosures. But many say it is much harder to get a mortgage now, and people are having to put a lot more money down when they buy. Home builders also have not been building nearly as many homes in recent years at they did heading into 2008.
“If you do have a job right now, it’s not sufficient. You need to have sufficient savings and pristine credit to get a mortgage,” said Wachter
When the pandemic hit, JPMorgan Chase tightened its lending standards even further, saying it would not issue a mortgage to anyone unless they could put 20 percent down and had a credit score of at least 700. Many Americans who could have obtained a mortgage in the 1990s are now locked out, Wachter says, another blow to anyone but those already well off right now.
“People who own homes are in the best financial shape in the country. They are not the people we should worry about. Renters are the ones who need help and forbearance," said Logan Mohtashami, lead housing analyst at Housing Wire, who predicted a rapid “V-shaped” recovery for home sales.
Renters like Steen are literally worried about becoming homeless in the coming months. While she tries to remain hopeful that she will land a job soon with a maid service to clean wealthy people’s homes, she knows it will be difficult to find another $700-a-month apartment if she loses her current one. Rents have not fallen nationwide, data show, and only about 2 percent of renters have received any deferment on payment, the Census found. In contrast. 4.5 percent of mortgage holders have been able to defer.
Despite applying for Florida’s unemployment aid online — and sending in a paper application — she has yet to receive any money. The $1,200 check the U.S. government sent in the spring provided a lifeline, but that money is now gone. Church food banks have helped her get by.
“I don’t know which way to turn. I really don’t,” Steen said. “I’m praying, and I’m mostly just stressed. I don’t want to be out on the streets."
An earlier version of the story incorrectly said 15 million homes were sold in April, May and June. In fact, 15 million homes were sold an annualized rate.