It looks like there’s a light at the end of the jet bridge. More than a year after closing its doors to foreign tourists as the coronavirus pandemic spread, the European Union has said that fully vaccinated Americans will once again be allowed to travel there—just in time for summer break. While that’s great news for those dreaming of a long-delayed getaway, it could also have implications for the red-hot real estate market.
Housing mania has gripped the nation this spring, as record-low mortgage interest rates and a severe shortage of homes for sale boosted home prices to new highs. Offers over asking price are now standard in much of the nation, as are bidding wars, in which buyers are going well over their budgets in an attempt to win one of very few listings.
But another factor enabling people to throw more money into the housing market is that there simply hasn’t been much to spend on this past year, with foreign travel and many other forms of entertainment off the table. Those who held on to their jobs over the past year may now be in a better financial place than they were before the coronavirus.
With the economy opening back up across the country, people “have pent-up demand for doing all the things they haven’t done in the last year or so, like traveling [and] concerts. They also have the savings to do it,” says Realtor.com® Chief Economist Danielle Hale.
“I don’t expect it to derail housing demand,” she adds. “But we may see a shift in mentality from ‘I want this home and I don’t care what it takes to get it’ to a mindset where people want to have a home, but also want to have income left to spend on other things.”
Plus, with people no longer confined to their homes by shelter-in-place mandates, frustrations with their current living situations may ease.
“Some of the COVID craziness around housing will start to ebb,” says Rick Palacios Jr., director of research at John Burns Real Estate Consulting. “We don’t expect the music to stop suddenly for housing, but the tempo of the beat will start to slow down.”
This doesn’t mean home prices will fall and real estate competition will suddenly die down. There is still a problematic shortage of homes for sale and a substantial number of folks who are reaching the stage of life where they want to own a home. But price growth may slow as the world begins showing signs that it may be returning to some semblance of normalcy.
“People didn’t just decide that they want to own a home because of the pandemic,” says Hale. “I expect a lot of demand for housing will stick around. But we might see people rein in the amount they’re willing to spend on their mortgage now that they can spend their money in other ways.”