Is the U.S. facing an impending wave of “homebuyer’s remorse?”
While the Delta variant is increasing the number of cases, COVID-19 vaccines and more effective treatments have kept hospitalizations and deaths far lower than in the pandemic’s early days. As a result, even if cases spike in the fall, the economy will likely continue to grow. The result will be a relatively normal American economy — and thousands of homeowners left with the consequences of hasty home-buying decisions made amid a lockdown.
Last year, as the virus began to sweep the globe and many nations went under hardcore lockdowns, many residents of big cities began scrambling to find property outside of the now-restricted confines of city centers.
There were widespread reports of buyers signing purchase agreements without ever having stepped foot in the homes they bought. Video chat services like Zoom and Facetime took the place of old-fashion walkthroughs and meetings, with one real estate agent predicting to the Wall Street Journal a “transition to people buying virtually en masse.”
This trend appears to have contributed to the high levels of “buyer’s remorse” among younger home purchasers. A recent Bankrate survey found that over 60 percent of Millennial homeowners have “some regrets” about their purchase, compared to just a third of Baby Boomers.
Media reports are full of “act in hate, repent at leisure” anecdotes from COVID-driven home sales. Realtor.com reports one homebuyer who snagged an Atlanta-area home for $30,000 over the asking price without ever having set foot in it, only to find when he arrived that the house had cracks in the foundation that will cost $50,000 to repair.
Another family, meanwhile, entered into a contract for a new home in upstate New York in the midst of the hardline New York State lockdown. On the other side of the pandemic, with travel opening up and a suburban location making less sense, they “have begun to second-guess their pricey purchase.”
“People are moving to places that they don’t know a lot about,” Fran O’Brien with Chubb North America Personal Risk Services told the Wall Street Journal earlier this year. “They’re thinking, ‘this looks like a nice place to live’ for amenities it may have. They don’t understand what risk there could be with that home.”
Homebuying regret has always been part of the real estate industry. But a year and a half of once-in-a-generation stress and upheaval could be ushering in an elevated rate of that phenomenon.
With Millennials forming the largest single cohort of homebuyers over the past year—nearly 40 percent, according to data from the National Association of Realtors—regret could be exacerbated by a variety of generational factors: Millennials hold the least wealth out of all current U.S. age cohorts, meaning their home purchases might be backed up by significantly less financial security than other demographics. That can create a double headache if a buyer wants to get out of a hastily signed contract.
“If you made a modest down payment, you may not have the equity to get out of that place,” Bankrate Chief Financial Analyst Greg McBride told Realtor.com.
Ironically, the real estate market that drove them to their now-regrettable decision may offer these same homeowners an out. Though it’s showing some signs of cooling off, it’s still a seller’s marketing, which means many of these buyers are well-positioned to sell their purchases and find something more suitable.
Still, for many, the last year of the pandemic has provided a tough lesson on the perils of purchasing a home fast—and, in many cases, unseen.