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In mid-March, the housing market was sent into a freeze as the coronavirus pandemic forced the closure of non-essential businesses and shelter-at-home orders were placed around the country.
On a national level, the housing market is beginning to recover with demand and home prices both on the rise. However, in the midst of social distancing and working from home, one sector has been outpacing the others: single-family homes.
“The single-family housing market has been a clear, if somewhat unexpected, beneficiary of COVID-19,” a late August report by UBS states.
It’s a remarkable change for a segment of the market that just months ago was on its way out, with some cities and states going as far as banning single-family zoning. Here’s how the single-family space went from a near-pariah of the housing market to leading its strong performance during the pandemic.
Single-family housing was seen pre-pandemic as something holding housing back
Single-family zoning was on the way out in early 2020. Oregon became the first state to ban single-family zoning in July 2019, after Minneapolis cut down on it citywide in December 2018. The New York Times reported that this type of zoning “has long perpetuated segregation,” while zoning-reform advocates pushed for an end to single-family zoning as a solution for the affordability crisis in real estate.
Things look very different in 2020, as working from home has meant it’s now a possibility for some to move to a bigger space in a less densely populated area for a more affordable price. Additionally, a single-family home is inherently safer for social distancing purposes as it cuts down on your contact with others.
UBS noted the trend of moving away from urban areas already existed, but has been accelerated by the pandemic.
“Given the shelter-in-place restrictions, the shuttering of many of the key draws in a number of cities (restaurants, museums, sporting events, concerts, nightclubs, etc.) has, for the current period, made dense city living less appealing for a number of people,” the report reads.
Historically low mortgage rates, which fell below 3% for the first time ever in July, are another huge boost to all the people wanting single-family homes. Pent-up demand from the nonexistent spring selling season, and older millennials getting married and having kids are other obvious boons to the market. Those other considerations, about single-family housing fostering inequality and a lack of affordability, aren’t top of mind in 2020.
Single-family is back and here to stay
Even as we inch toward a post-pandemic market, UBS sees the interest in single-family homes remaining, at least to some degree.
It’s important to note, per UBS, that not all people leaving the city are buying homes. There are some who are renting or hiding out in their second home until the city returns to normalcy. The report predicts that, among other things, a sense of normalcy will return to dense cities, along with many of the people who have left.
However, the report also finds that workers for companies based in expensive cities like New York and San Francisco may genuinely not need to go back. In other words, single-family homes could be back for good.SEE ALSO: A high school teacher in Detroit bought a ‘trashed’ home in the city for $2,600 and got it into livable condition in less than 2 years. Here’s how she did it.
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