Finding the perfect home can be quite a challenge. Add a pandemic into the mix and it might become a series of twists, turns or the perfect opportunity thanks to low interest rates.
According to data compiled by the Texas Real Estate Research Center at Texas A&M University, the housing market in El Paso heated up during the pandemic, with homes selling at a median home price of $177,000 in 2020. That’s a 9% increase over the prior year.
Low interest rates, currently averaging at 2.75%, increased the affordability of homes among buyers.
But the pandemic did throw a few wrenches into the mix.
Jennifer Stroh Viescas, regional vice president for Texas Realtors Region 16 and real estate agent with Century 21 The Edge for 28 years said the market in 2020 saw an extreme drop in listings as the pandemic hit in March 2020.
“People got scared,” Stroh Viescas said. “They started either taking their houses off the market because they were scared, and they didn’t know what (the pandemic) meant. Or maybe they themselves had tested positive for COVID. And so, they had to then quarantine or maybe the houses were up available for sale, but it had a renter in it and the renters claiming to show it because they were scared, which they have the rights to do.”
The uncertainty of what COVID-19 meant immediately flipped the market from what was a buyers’ market to a sellers’ market within a matter of days, Stroh Viescas said. However, the market remained strong because of housing demand.
“There was still a need for the housing,” Stroh Viescas said. “So, April and May 2020 was kind of strange for us. I had never seen anything like that happen, even when we had that grand housing boom in 2005, 2006 and 2007 – it didn’t happen immediately like this happen.”
A buyer’s tale
In 2019, Celeste and Danny Ornelas wanted to sell their home in Horizon City and move back to the Cielo Vista area where Celeste had grown up. What began to look like a journey that might take a few months turned into a year-long search for a home that was interrupted by COVID-19 complications.
The Ornelas familyinitially put their house up for sale in August 2019. They received their first offer in February 2020, but due to the lender’s dissatisfaction with the buyers the contract was terminated. By that time, it was mid-April, COVID was well underway, and real estate agents were less likely to show homes that were currently being lived in.
“Luckily, we had moved out of the house already,” Celeste Ornelas said. “So people were comfortable showing it because the house was empty, and we had it cleaned.”
The family had already begun looking for their new home in mid-April, but were outbid or lost homes due to delays in receiving appraisals at the beginning of the pandemic.
In June, they placed an offer on another home in the Cielo Vista area but had to wait a month to get an appraiser out to the home. The seller canceled the contract.
Finally, on Aug. 18 – a year after they had put up their house for sale – the Ornelas family found their home. But it still took a month to get an appraiser to the house, and they couldn’t close until October. They paid an estimated $30,000 more than the asking price.
What economists say
The Ornelas family’s journey in buying their second home is not unusual, experts said. Given the current state of the pandemic, the housing market remains strong due to the limited supply of homes and high demand.
Luis B. Torres, a research economist at the Texas Real Estate Research Center at Texas A&M University, said the available homes up for resale in El Paso is at a historic low.
“We would see some very low months of inventory but not at this level,” he said. “These are historical moments of low inventory right now. The COVID-19 pandemic played a role, and that increased the preferences of people who want to purchase a home.”
Torres said those able to purchase a home in this current market are people who weren’t largely affected by the pandemic. “They’re more educated, paid at a higher scale, they still have their jobs and work in industries where they can socially distance, they can work from home.”
He said the strength of the housing market has been surprising, considering that the country has been in a recession for months.
“In prior recessions the housing market would take a hit,” he said. “Why? Because normally what happens during a recession is people get laid off and you lose your income. So, people are not in the market to buy a house. But what happened now in this pandemic that is totally different than prior recessions was that bifurcation of the economy.”
In other words, the pandemic highlighted the divided economy and income inequality. Renters have been hit hardest by job losses.
Torres said slow economic growth at the end of 2020 and the start of 2021 indicates that the housing market will continue to have low inventories, with price appreciation.
Market forces during the pandemic
Bidding wars over resale homes are common in a sellers’ market, Stroh Viescas said. “There will be multiple offers on a home, yes,” she said. “And homes being sold at above market value as well.”
However, those borrowing to buy a home must be careful not to bid above market rates.
“The appraisers are basically the gods of real estate,” Stroh Viescas said. “If they say no, then the answer is no and there is no changing it, unless you’re paying cash. But if you’re going to get a loan, you’re going to have to get an appraisal.”
As for newly constructed homes, builders set the price – but that price may also be affected by the price of the materials, lot availability, labor costs and now COVID delays. As it stands right now, most builders are sold out and they are scrambling to build.
Normally, a new home takes about six to eight months to build. But with the pandemic, that timeline has increased and now a new home may take up to 10 months to be ready.
“New home construction is really increasing in February,” Torres said, “But they are still going to lag behind. For them it’s been an issue to find land at reasonable land cost, especially if they want to build a home with a price tag below $300,000.”
The decision to purchase a home in this sellers’ market ultimately depends on several factors – job security, family size, need, availability, and budget.
“If you are putting yourself at risk of later on not being able to pay the mortgage payment, then definitely don’t risk it,” Torres said. “It’s such a personal decision and it really depends. If the house you want is available and it’s in the school district you want, and if it means you made a financial plan that allows you to go off a little bit more above your budget than you wanted, and it will not affect you and your capacity to pay off your mortgage payments going forward – then go for it. Is now a good time? It depends, because the other thing you have to consider is that prices are going to continue to go up because of the low inventories.”
Author: Alex Hinojosa – El Paso Matters
Hinojosa is an El Paso freelance journalist and a mass communications instructor at El Paso Community College.