A new survey from Redfin points to demographic differences in the housing market as furthering the divide between the “haves” and the “have nots.”
The study , which the real estate brokerage said highlights the “wealth divide” in the United States, looked at unemployment rates, demographic housing sales data, and racial breakdowns among industries hit hard by the economic shutdown versus those that appear to have weathered the storm.
“The housing market has mostly been driven by white households with higher incomes—households less likely to have been severely affected economically by the coronavirus shutdowns,” Redfin said, adding that this exacerbates inequality trends in the housing market over the past decade.
“The great injustice of this recession is that it is likely to have deeper and longer-lasting impacts on the people who were already struggling. Those who were well-off and have maintained job security throughout the worst of the shutdowns are already practically back to business-as-usual, which is leading to a rapid recovery in homebuying demand.”
The economic fallout from COVID-19 has touched on nearly every industry and job sector with the hospitality, service, and entertainment industries feeling almost decimated. In April, restaurant employees reported 34.8 percent unemployment, bar workers reported 60.6 percent unemployment, and hotel unemployment was at 48.7 percent, according to the Bureau of Labor Statistics. On the flip side, high tech and other white-collar industries have seen lower unemployment rates and are starting to recover from the initial fallout.
Diving into metro regions where these various industries are represented, Redfin says that potential homebuyers in places like Seattle and San Francisco – where demand is over 35 percent above pre-coronavirus levels – are better positioned than those in areas like Las Vegas.
Other cities are seeing strong rebounds, too.
The survey noted that in Detroit, which recorded a stunning 25 percent unemployment rate in April, is one of the strongest areas for homebuyers right now.
“People who are still employed and confident in their continued employment still really want to buy,” said Detroit Redin agent Tony Orlando. “They know rates are at historic lows and they want to take advantage of it; they are not afraid to buy during these odd times. Buyer demand is insane here, and nearly every home is a multiple offer situation.”
The president of the National Association of Mortgage Brokers disputed Redfin’s conclusions, saying that while the data is accurate, the company is using that to point to a certain conclusion.
“Anybody who is out of work is going to have trouble getting a mortgage,” President Rocke Andrews said. “The COVID problem is affecting more minorities mainly because it’s affecting people in the hospitality industry, which historically has higher minority employment.”
A look at specific breakdowns in the labor force for 2019 at select industries and subcategories that are struggling the most due to economic locks from the coronavirus backs that up, based on data from the Bureau of Labor Statistics.
People who identified as Black or African American made up 13.1 percent of the broad category of Leisure and Hospitality and Hispanics 24 percent. In the subcategory of Accommodations and Food Services, Blacks/African Americans comprised 13.9 percent of the labor force and Hispanics 27 percent. In Transportation and Utilities, Blacks/African Americans were 20 percent of the workers and Hispanics 18.8 percent. Under the subcategory of Bus Service and Urban Transportation, Blacks made up 31.4 percent of the labor force and Hispanics 23.5 percent.
The 30-year fixed-average mortgage rate hit a record low of 3.13 percent last month, which could lead to increased activity in late summer and early fall with pent up buyer demand and decreasing coronavirus concerns coupled with the low rates.
In December, realtor.com released its 2020 Housing Forecast, which, as Senior Economist George Raitu said, “got derailed” five months into the year. The company’s updated forecast indicates that prices will flatten with home sales dropping by 15 percent compared to a slight drop of 1.8 percent from its initial forecast.
“[Our] data suggest a strong rebound in buyer activity,” National Association of Realtors Vice President of Demographics and Behavioral Insights Jessica Lutz said. “There has been a move toward suburban and even rural living as buyers seek less dense areas. These areas not only provide buyers with relative affordability, but they also allow for space to work remote and even additional land for homeowners to stretch their legs and grow their own food.”