(TheConservativeNews.org) – The coronavirus pandemic dealt a blow to the economy, and the United States is still in recovery. However, some businesses and industries appear unaffected, and some are even doing better than they were last year. For most people looking to buy a home, the current outlook isn’t good.
Impacting an Industry
Several industries, such as food and retail, took hard hits as governments locked down their communities. Despite everything, it seems the pandemic actually boosted the housing market rather than making it crash. One of the places it hit the hardest is Los Angeles, CA, where the price of homes keeps increasing.
Houses in the area are selling like hotcakes, even well above their market price. If the people will pay, businesses will continue to increase costs. Thanks to consumer-driven inflation, once a symbol of wealth has become commonplace in California: the million-dollar home.
The real estate website Zillow came up with a formula to find the typical value of a single-family home in Orange and LA County. The $1 million price tag is common in both counties, but Zillow found that 17 properties crossed the threshold during the pandemic.
Real Estate agent Maureen Hollingsworth noted that when she started her career selling houses 41 years ago, a million-dollar home was a five-bedroom house with a good amount of land. Now, she said that the same amount of money only gets you a two-bedroom home on a small lot.
When Did $1M Become Affordable?
One million dollars is worth much less than it was nearly 20 years ago. In 2006, a person with good credit could buy a $1M home with 20% and a 6.47% interest; then, their monthly mortgage payment would have been around $6,266/month. In 2018, that same property with the same amount down would cost approximately $5,298/month at a 4.54% interest rate. Now, in 2021, that same house takes a 2.88% interest rate, costing the person only $4,546/month.
While many people can’t afford over $4K a month, there are a considerable many who can. If a household makes a combined income of $150K+, lenders typically have no problem approving a loan for $1 million. Many of these high-dollar homes are selling to first-time home buyers in their 20s and 30s who work in engineering, entertainment or tech jobs.
The Pandemic Actually Helped
The pandemic forced many high earners to work from home, which helped them save on travel and other expenses. The crippled economy has treated families with high incomes surprisingly well. At the onset of the pandemic, stocks dove; now, as the economy recovers, many people are banking on price increases, which they can use as down payments on these properties. More often than not, coming up with 20%, or even half that, can be difficult, even for wealthier couples.
Some people bought their home years ago but now have substantial amounts of home equity built up, allowing them to sell their homes for well more than they paid for them. They may even refinance. The housing market doesn’t appear threatened by a dive anytime soon as prices continue to rise. As long as people pay the prices, no one is going to lower their costs.
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