The coronavirus ushered in a heavy shift to remote work and pushed droves of consumers to the suburbs for more space and better value. Now that the market caught up to the initial wave, borrowers are looking even further from cities in their search.
Median sales prices in rural areas spiked 11.3% year-over-year for the four weeks ending Aug. 2, according to Redfin. Comparatively, prices rose 9.2% in suburbs and 6.7% in urban markets over that same time frame. In addition to the unprecedented mortgage rates, the extremely limited housing supply is causing bidding wars.
"We're seeing concrete evidence that rural and suburban neighborhoods are more attractive to homebuyers than the city, partly because working from home means commute times are no longer a major factor for some people,” Taylor Marr, Redfin economist, said in the report. "And due to historically low mortgage rates, interest is turning into action."
Trends in home searches have fluctuated since the pandemic began, with 19% of shoppers looking at rural properties now compared to 9% before the quarantining started. Suburb searches grew to 50% from 43% while interest in cities suffered the biggest change, falling to 19% from 37%. Small towns stayed at 11% in both cases.
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Bottomed-out inventory adds upward pressure to the rising prices while the market faces fierce consumer demand. For-sale homes plummeted 21.8% in July from the year before and 2.2% from June, according to a separate Redfin report. As sales outpace houses coming on to the market, active listings fell annually for the 11th consecutive month and marks the lowest supply level for July on record.
Overall, median sales prices increased 8.2% annually in July and 4.3% month-over-month.
"It may seem like the Twilight Zone for the housing market to be performing better than ever while the economy is in the tank, but it goes to show that we are in truly unprecedented times," said Redfin Chief Economist Daryl Fairweather.
"The housing market was incredibly robust going into the pandemic with household debt at its lowest level in 40 years," she said. "The less debt someone has, the less likely they are to be worried about affording a mortgage, which is as inexpensive as it's ever been due to record-low interest rates."