US Housing Market during COVID-19: Aggregate and Distributional Evidence

Abstract

Using zip code-level data and nonparametric estimation, I present eight stylized facts on the US housing market in the COVID-19 era. Some aggregate results are: (1) growth rate of median housing price during the four months (April-August 2020) since the Federal Reserve's unprecedented monetary easing has accelerated faster than any four-month period in the lead-up to the 2007-09 global financial crisis; (2) the increase in housing demand in response to lower mortgage interest rates displays a structural break since March 2020 (housing demand has increased by much more than before). These results indicate either the existence of "fear of missing out" or COVID-induced fundamental changes in household behavior. In terms of distributional evidence, I find that the increase of housing demand seems more pronounced among the two ends of the income distribution, possibly reflecting relaxed liquidity constraints at the lower end and speculative demand at the higher end. I also find that the developments in housing price, demand, and supply since April 2020 are similar across urban, suburban, and rural areas. The paper highlights some potential unintended consequences of COVID-fighting policies and calls for further studies of the driving forces of the empirical findings.

COVID-19’s impact on real estate markets: review and outlook

“…Additionally, a study by Zhao (2020), takes a detailed look at the recovery of the housing market after April 2020. The author documents increasing property prices and higher housing demand due to the Federal Reserve's unprecedented monetary easing as a part of COVID-19 fighting policies.…”

Real Estate and Rental Markets During COVID Times

“…Having said that, since the rise in house prices has been more significant, the decrease of rent-price ratios is confirmed. 43 In March 2020 personal saving jumped to levels that were more than six times greater than pre-crisis ones. In January 2021 personal saving was still 4 times greater pre-crisis saving.…”

“…Not surprisingly, personal savings have spiked. 43 The pandemic has also imposed distance working so that have stagnated on average. Having said that, since the rise in house prices has been more significant, the decrease of rent-price ratios is confirmed.…”

Pathways to regional housing recovery from COVID-19

“…They found particularly large reductions in house prices during the first six months of an epidemic in heavily-affected areas, but these were transitory: both cities quickly reverted to their initial price paths. For COVID-19, Zhao (2020) found an increase in housing demand in the U.S. as a response to low interest rates and a 'fear of missing out', or fundamental changes in household behaviour. The increase in housing demand was also more pronounced for the two ends of the income distribution, reflecting relaxed liquidity constraints at the lower end and speculative demand at the higher end.…”