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How the pandemic housing market spurred buyer's remorse across America

AILSA CHANG, HOST:

A version of the American Dream includes buying a home. But homeownership is not without its challenges.

LAUREN MORGAN: The day we moved in, our air conditioner broke. And so that was, like, the first instance of is this a mistake?

CHANG: That's Lauren Morgan. She's 30. And she and her husband are the proud new home owners of a quaint home in Norwood, Mass., 30 minutes south of downtown Boston. Like many millennials, they moved in June of 2021. And...

MORGAN: Every time something does come up, I say to my husband, like, maybe we should be renting. Like, if only we were still renting, then the landlord could deal with this.

CHANG: But they bought a home instead. And when they made an offer on this house, they took a bit of a risk to fend off the competitors.

MORGAN: We made the decision to waive an inspection. We have since had plumbing issues. We currently have a hole in our dining room ceiling because we just had a leak in our plumbing.

CHANG: And that's not all.

MORGAN: In the coldest week of the winter, our furnace broke - getting a new HVAC system. So ultimately, I think, you know, all in all, it's probably cost us around $20,000.

CHANG: According to Real Estate Witch, home values increased nearly 20% from the first year of the pandemic to the second. But that increase didn't seem to discourage homebuyers much. NPR heard from a lot of first-time homeowners who made compromises they didn't want to make, in part because they wanted so badly out of the high rental market.

MORGAN: My husband and I were both so sick of being on top of other people all the time, not only with COVID but just, you know, people being loud neighbors or disrespectful or not having control, really, over the space that you live in.

ABBIE CULBERTSON: I rented the same apartment for 12 years in Nashville and recently got word that we are under new ownership and management - and rent increases going up in the past year.

MAYA BRODKEY: When COVID hit, my wife owned a small business, and overnight she didn't. We were living in the Bay Area at the time. And my employment was stable. But without her income, we weren't going to be able to continue to afford rent there.

CHANG: Again, we heard from Lauren Morgan as well as from Abby Culbertson in Nashville, Tenn., and Maya Brodkey from Oakland, Calif., sharing their first-time buying experiences. Some of what we heard there created kind of this perfect storm - like people working from home during this pandemic, low interest rates on loans and millennials in their 20s and 30s who felt that now - now - was simply the time to buy a home. Professor Hyojung Lee of Virginia Tech studies the impacts of demographic and neighborhood change on housing markets. We called him up for some context, and my first question was, tell me more about why, like why so many people felt they had to jump into this market now.

HYOJUNG LEE: COVID-19 pandemic has accelerated everything, right? So on one hand, like, Fed reserves, like, low interest policy basically to support U.S. economy during the pandemic kind of resulted in, like, historically low mortgage interest rate. I don't know how - what was your kind of mortgage interest rate, but it was like two-point-something, right? That was kind of crazy compared to a year ago, two year ago, that was 3.5%, even near 4%. So people thought, wow, this is really great timing to buy a home with, like, 30-year fixed rate, right? And on the other hand, like, pandemic kind of increased the huge demand for this type of single-family house with backyard. I mean, many kind of parents having their children, like, doing remote learning, spending 24 hours and seven days at their home desperately feel like we need a backyard or a pool.

CHANG: Exactly. And what about the role of the high rental market? Because NPR did a callout. And one of the people who responded was someone named Maya Brodkey, an educator who used to live in a one-bedroom in Oakland, Calif., with her partner. And she just said she had enough of the rent spikes and poor conditions of rental properties.

BRODKEY: There was this moment where I was trying to teach online, and we could hear our neighbors having a screaming match next to us. And my partner, she's working in this little crawl space underneath our apartment that literally had dirt walls. And there was just kind of this moment where we were, like, we can't keep paying for this. We got to get out of here.

LEE: So rental affordability crisis has been a issue for, like, even 1970s, 1990s. That has been an issue for many kind of renters. But now, it's much more severe, especially after the financial crisis because of the fact that, you know, supply of that kind of rental housing has been really just kind of stagnated - right? - that barely meet the demand for housing on one hand. On the other hand, there's been somewhat, you know, pent up, you know, demand for rental housing. So many millennials and young earners hit hard by the, you know, global financial crisis, and they stayed in the rental market longer than other expected. So high-income earners stayed in the rental market. That pushed up rental price for a long time period since, like, 2007, 2008. And that created quite substantial increases in rental prices in these days.

CHANG: OK. So for the people who decide to jump into this housing market, they're seeing really low inventory. There's a lot of competition. Can you just talk about the pressure cooker situation that that creates and what a lot of people end up doing when they're making an offer on a house? I mean, they're giving up on things, right? They're waiving contingencies.

LEE: It's really difficult to those first-time homebuyers who spend their, like - about, like, 20 years, 30 years as renters to figure out, you know, how much money they have to pay for, say, maintenance fees, like, property tax and insurance. They always think about just kind of monthly mortgage payments. But actually, there are much more things to spend in addition to that. And, you know, there are some other costs as well in terms of, you know, upkeep and repairs. And those costs has been, like, soaring during the pandemic especially, right? So generally, we give some advice about these kind of things. There is kind of 1% rule of thumb. So you have to think about, you know, saving about 1% of your housing value because that's amount of money that you will spend annually for any type of upkeep or repairs.

CHANG: Wow. I wish I knew that rule before I did this.

(LAUGHTER)

LEE: Because there is always something happens - right? - on your roof, on your, like, water heater, like, boiler, right?

CHANG: Yeah. That was professor Hyojung Lee from Virginia Tech talking to us about why some buyers rushed into the market and may now be feeling some buyer's remorse. Of course, buyer's remorse in this housing market may seem like a good problem to have to those people who were shut out completely from the market. According to a report this month, homeownership among Latinos and Black people in the U.S. hovers between 42% and 45% while over 70% of white people own their homes. Joshua Devine is the director of Racial Economic Equity at the National Community Reinvestment Coalition, or NCRC.

JOSHUA DEVINE: We can't just think about housing or housing barriers just within the housing market as a siloed issue. You've got to think about how housing relates to things like workforce. It's one of those wicked, complex problems that require more of a comprehensive approach and strategy to overcome.

CHANG: Devine says this lack of home ownership is connected to the longtime legacy of intentional housing discrimination and other barriers like today's wage stagnation.

DEVINE: You know, I think it's also important to think about the market and the institutions within the market. How do we make sure that we're holding them accountable to mitigating barriers but also strengthening access to credit?

CHANG: In other words, when this pandemic subsides and when this housing market calms down, there will still be structural barriers to reckon with that could keep many Americans from ever owning their first home. Transcript provided by NPR, Copyright NPR.