How the pandemic housing market spurred buyer's remorse across America

Jason Fuller, Ailsa Chang, Justine Kenin | NPR

March 22nd, 2022

Home values increased nearly 20% in the 12 months to September 2021.
Tim Boyle / Tim Boyle

Low interest rates, high rents and working from home combined to push many young Americans to buy their first home over the last two years. But this version of the Great American Dream is not without its challenges, as Lauren Morgan found out.

“The day we moved in, our air-conditioner broke,” she told NPR. “And so that was the first instance of, ‘Is this a mistake?'”

Morgan, 30, and her husband own a quaint home in Norwood, Mass., outside of Boston. Like many millennials, they moved in June of 2021. And to get ahead of the hyper-competitive market and ensure they won the bidding, they decided to waive their inspection.

“We have since had plumbing issues. We currently have a hole in our dining room ceiling because we just had a leak in our plumbing,” Morgan said.

Then in the coldest week of winter, their furnace broke and they had to get a new HVAC system. Morgan calculates they have spent about $20,000 since they bought the house.

“Every time something does come up, I say to my husband, maybe we should be renting. Like, if only we were still renting, then the landlord could deal with this.”

According to Real Estate Witch, home values increased nearly 20% between September 2020 and September 2021, with many millennials maxing out their budget and then later regretting it. NPR heard from a lot of first-time homeowners who made compromises to secure a house of their own, in part because they wanted so badly out of the high rental market.

“I rented the same apartment for 12 years in Nashville and recently got word that we are under new ownership and management, and rent increases were going up in the past year,” Abbie Culberston said.

Maya Brodkey added: “When COVID hit, my wife owned a small business, and overnight she didn’t. We were living in the Bay Area at the time. And my employment was stable. But without her income, we weren’t going to be able to continue to afford rent there.”

Don’t forget the 1% rule

Professor Hyojung Lee of Virginia Tech studies the impacts of demographic and neighborhood change on housing markets, and said the historically low interest rates were one driving factor that spurred people to buy.

“And on the other hand, the pandemic increased the huge demand for this type of single-family house with a backyard,” he said. “Many parents having their children, doing remote learning, spending 24 hours and seven days at their home desperately feel like [they] need a backyard or a pool.”

Another pressure point was the flow-on effect of 2008 financial crisis, Lee said, as millennials stayed in rental homes longer, which put pressure on housing stock.

“So high-income earners stayed in the rental market,” he said. “That pushed up rental prices for a long time period since, like, 2007, 2008. And that created quite substantial increases in rental prices in these days.”

And Lee said that led to some questionable decision making. Besides being willing to skip inspections or buy sight-unseen, many millennials weren’t ready for the other costs that come with home ownership.

“There is kind of a 1% rule of thumb,” Lee said. “So you have to think about, you know, saving about 1% of your housing value, because that’s the amount of money that you will spend annually for any type of upkeep.”

Of course, buyer’s remorse in this housing market may seem like a good problem to have to those people who were shut out completely. According to a report released this month, homeownership among Black people in the U.S. hovers between 42% and 45%, while more than 70% of white people own their homes.

Joshua Devine is the director of Racial Economic Equity at the National Community Reinvestment Coalition, and said we can’t think about barriers in the housing market as a siloed issue.

“You’ve got to think about how housing relates to things like the workforce,” he said. “It’s one of those wicked, complex problems that require more of a comprehensive approach and strategy to overcome.”

Devine said this lack of home ownership was connected to the legacy of intentional housing discrimination and other barriers like today’s wage stagnation.

“It’s also important to think about the market and the institutions within the market,” he said. “How do we make sure that we’re holding them accountable to mitigating barriers but also strengthening access to credit?”

In other words, when this pandemic subsides and when this housing market calms down, there will still be structural barriers to reckon with that could keep many Americans from ever owning their first home.