Consider This from NPR - Some Who Rushed To Buy Homes During The Pandemic Now Regret It

Episode Date: March 16, 2022

The pandemic created a spike in demand for housing that sent real estate prices through the roof. Which means a lot of Americans could no longer afford to buy, while many of those who could are now experiencing buyer's remorse. NPR heard from many new homeowners who made compromises as they rushed to buy. Some even waived inspections or moved sight-unseen. Hyojung Lee, a professor at Virginia Tech, explains how low interest rates, lockdowns and a desire to stop renting created the real estate scramble. In participating regions, you'll also hear a local news segment to help you make sense of what's going on in your community.Email us at [e-mail] more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

The day we moved in, our air conditioner broke. And so that was like the first instance of, ah, is this a mistake? That is Lauren Morgan. She's 30 years old and she and her husband are now the new owners of a quaint home in Norwood, Massachusetts, 30 minutes south of downtown Boston. They moved in June of 2021. And every time something does come up, I say to my husband, like, maybe we should be renting. Like, if only we were still renting, then the landlord could deal with this.

Instead, the couple decided to buy a home. And after they made an offer on this house, they took a bit of a risk to beat out the other competitors. We made the decision to waive an 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. Wait, there's more. In the coldest week of the winter, our furnace broke getting a new HVAC system. So ultimately, I think, you know, all in all, it's probably cost us around $20,000. One huge reason Morgan and her husband rushed into this home purchase is because they wanted out of the rental market. My husband and I were both so sick of being on top of other people all the time,

not only with COVID, but just, you know, people being loud neighbors or disrespectful or not having control really over the space that you live in. And the Morgans, I mean, they're not unique. NPR has heard from a lot of first-time home buyers who made compromises because they were desperate to stop renting, like Abby Culbertson in Nashville. I've rented the same apartment for 12 years in Nashville and recently got word that we are under new ownership and management and rent increases going up in the past year. And take Maya Brodke from Oakland. 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. Consider this. The pandemic created a spike in demand for housing that sent real estate prices through the roof, which means a lot of Americans could no longer afford to buy. Well, many of those who could are now experiencing buyer's remorse. I think we just kind of dove in headfirst. I think there are things we just did not consider. From NPR, I'm Elsa Chang. It's Wednesday, March 16th. This message comes from WISE, the app for doing things in other currencies.

Send, spend, or receive money internationally, and always get the real-time mid-market exchange rate with no hidden fees. Download the WISE app today or visit WISE.com. T's and C's apply. It's Consider This from NPR. Okay, we'll get back to all those homeowners feeling buyer's remorse in a minute. But first, we just want to acknowledge the people who had a hard time hanging on to their homes these past two years. I think a lot of the focus for us as an organization during the pandemic was how do we support or ensure existing homeowners aren't losing their homes, particularly while their economic conditions were a bit unstable. That's Joshua Devine. He's the director of racial economic equity at the National Community Reinvestment Coalition, or NCRC. Aside from the fight to keep families in their homes, Devine's been keeping his eye on people of color who've been further squeezed out of the market during this pandemic. I do believe that the knowledge gap plays a significant role

in increasing access to homeownership for people of color. There has been an increase in applicants of color in home purchase loans since 2007, but that growth has only grown about 2.4% over that time frame. He says that aside from the legacy of intentional housing discrimination, communities of color, specifically African-American households, run into additional barriers tied to wage stagnation

and information gaps during the buying process. And he says the remedy has to include viewing all of those barriers as connected. We can't just think about housing or housing barriers just within the housing market as a siloed issue. You've got to think about how housing relates to things like workforce. It's one of those wicked, complex problems that require more of a comprehensive,

kind of multi-pronged approach and strategy to overcome. For those Americans who did move during the pandemic, 80% didn't go that far. They stayed near their city or headed out to the suburbs, while others took more of a risk. I had never set foot in Texas until we got down here. Emily Prisoner moved more than 2,000 miles from Seattle to San Antonio, Texas. Yeah, we lived in a condo that was like a little over 900 square feet. And my husband and I were both working at home. So I would do my Zoom meetings from our closet.

The condo was part of an old converted high school in the city. And in June of 2021, the couple decided to uproot and upgrade to a 3000 square foot house that was being built in San Antonio. It was a little rash to be sure, but it felt like an adventure. And they were eager to move in as soon as possible because Emily was seven months pregnant. But the supply chain slowed down through a wrench in their plans. So we brought our newborn baby home to an Airbnb, and then we moved him to four different ones. So it's like living out of suitcases, packing up a bassinet, not knowing exactly what we're going to get into. So that in itself was a regret. Emily and her husband eventually moved in and they've got family members in the state who've been helping quite a bit.

But that excitement that came with a pandemic move has been totally wearing off. It's been an adjustment. I mean, we loved Seattle. We miss Seattle. It's one of those things where it's like the pandemic skewed our perspective a little bit too because we were spending so much time indoors. COVID-19 pandemic has accelerated everything, right? Ho-Joon Lee is a professor at Virginia Tech where he studies the impacts of demographics

and neighborhood changes on the housing market. And he told me that a lot of factors contributed to this pandemic housing boom, like those monthly relief payments that showed up in a lot of Americans' bank accounts. Also a factor were the extremely low interest rates. So on one hand, like Fed reserves like low interest policy basically to support U.S. economy during the pandemic kind of resulted in like historically low mortgage interest rate. But it was like two point something, right? That was kind of crazy compared to a year ago two year ago um that was 3.5 percent even near four percent so people thought wow this is really great timing to buy a home with like 30 year fixed rate right and on the other hand like pandemic kind of

increased the huge demand for this type of single single family house with backyard. I mean, many kind of parents having their children, like doing remote learning, spending 24 hours and seven days in at their home, desperately feel like we need a backyard or a pool. Exactly. And what about the role of the high rental market? Because NPR did a call out, and one of the people who responded was someone named Maya Brodke, an educator who used to live in a one bedroom in Oakland, California with her partner. And she just said she had enough of the rent spikes and poor conditions of rental properties. There was this moment where I was trying to teach online and we could hear our neighbors having a screaming match next to us. And my partner, she's working in this little crawl space underneath our apartment that literally had dirt walls. And there was just

kind of this moment where we're like, we can't keep paying for this. We got to get out of here. So rental affordability crisis has been an issue for like even 1970s, 1990s. That has been an issue for many kind of renters. But now it's much more severe, especially after the financial crisis, because of the fact that, you know, supply of that kind of renter housing has been really just kind of stagnated, right? That barely meet the demand for housing on one hand. On the other hand, there has been somewhat, you know, pent up, you know, demand for housing on one hand. On the other hand, there's been somewhat pent-up demand for rental housing. So many millennials and young adults hit hard by the global financial crisis,

and they stayed in the rental market longer than others expected. So high-income owners are staying in the rental market that pushed up rental price for a long time period since like 2007, 2008. And that created quite substantial increases in rental prices in these days. Okay. So for the people who decide to jump into this housing market, they're seeing really low inventory. There's a lot of competition. Can you just talk about the pressure cooker situation that that creates and what a lot of people end up doing when they're making an offer on a house? I mean, they're giving up on things, right? They're waiving contingencies. It's really difficult to those first-time homebuyers

who spend their about 20 years, 30 years as renters to figure out you know how much money they have to pay for say in tenants fees like property tax and insurance they always think about just kind of monthly mortgage payments but actually there are much more things to spend in addition to that and you know there are some other costs as well in terms of you know upkeep and repairs. And those costs have been soaring during the pandemic especially, right? So generally, we give some advice about this kind of thing. There is kind of 1% rule of thumb. So you have to think about saving about 1% of your housing value because that's the amount of money that you will spend annually

for any type of cable repairs. That was Ho-Joon Lee, a professor at Virginia Tech. Of course, not every homeowner is experiencing regret. NPR heard from a number of people who feel great about their decision to buy. Like Joseph Tykanovich, who relocated from Williamsburg, Virginia to South Bend, Indiana. It's been a good transition. I'd never been to South Bend before, but really love the town. It's kind of this cool, very affordable, underrated little town.

We were able to get a pretty nice house in a really desirable neighborhood, very affordably and very easy to walk to. Farmer's markets and food co-ops and jazz clubs. And Samara Shima, who left California and bought property in Washington state. We feel really, really lucky to have gotten in on the market to actually get a house. And we think given the market situation with housing, to have a house that hits 80% of your must-haves is actually really amazing. As for Lauren Morgan and her husband, that couple we heard from at the top of this episode, the one with all of those headaches, well, they have found a silver lining.

I don't know if it's cognitive dissonance, myself justifying that, like, I've had to put in all this effort now, so I must really love the house. But for me, it really is a space that I love. And when I go home almost every day, I feel grateful that I have that space that is my own. Thank God. It's Consider This from NPR. I'm Elsa Chang.