The single-family housing market was particularly strong in 2020. As of Q4 2020, home prices appreciated 10.8% year over year, according to the Federal Housing Finance Agency (FHFA).
The National Association of Realtors (NAR) reported that sales of existing homes in the fourth quarter rose more than 20% year over year.
Much of that increase is attributable to the COVID-19 pandemic. A desire for more comfort and outdoor space while forced to spend more time at home, paired with very low mortgage rates, is bound to have a strong emotional effect.
But the spectacular demand levels of the last 10 months are now getting something extra - consumer enthusiasm.
It’s not just about the flight to suburbia, anymore. Amid massive government stimulus and encouraging economic numbers, many people are simply excited about new spaces - despite a recent bump in prevailing mortgage rates.
In short: Moving is still on a lot of people’s minds. Google searches about the homebuying and selling processes are way up.
Even in the years prior to the pandemic, most Americans viewed housing as a safe investment with high potential, a perception which appears no signs of abating.
In its 2021 National Housing Survey conducted in March, Fannie Mae found that 75% of percent of respondents ranked homes just below a savings/money market account in terms of safety. Additionally, 73% of consumers thought an investment in a home has "a lot of potential" – compared with 63% who felt that way about stocks.
In a recent survey 61% of respondents said it is a good time to sell a home, up from 55% in February, and an increase of 17% percent since March 2020. Americans appear to have an ingrained belief in the “American Dream” of homeownership.
Nearly 90% of those surveyed believe that owning a home is important for "the good life,” including health, financial security, preferred living location, and work/life balance.
Often overlooked, a mortgage loan is also a forced savings mechanism, with a principal balance gradually reduced by funds that would otherwise have gone to rent payments.
After this "imputed rent" is included, the rate of return on owning a home has historically been like other asset classes such as stocks. The reasons may vary, but the experiential aspect of living within your investment plays a major role in its high perceived value.