The COVID-19 pandemic has made 2020 a difficult year for many industries, but the housing market has been surprisingly resilient. In fact, “mortgage originations are on track to have their best year ever” and home sales are expected to “come close to their 2019 levels,” according to a new report from LendingTree.
40 million Americans lost their jobs due to COVID-19 and the economic turmoil it has caused, and about half of them are still having to rely on unemployment benefits as of last month. In spite of the slow economic recovery, some homebuyers have put down larger down payments on homes in 2020. Surprisingly, the percentage of mortgage applications on LendingTree’s platform that had a down payment of 20% or greater has increased this year.
In 2019, 38% of mortgage applications on LendingTree had a down payment of at least 20%, which decreased only slightly From January through March of 2020 to 36%. From April through June of this year, this increased to 49% of borrowers who put down more than 20%. TIn July through October 2020, the share of borrowers who gave down payments of 20% or more was still high at 48%.
This data is consistent across the United States’ 50 largest cities, with Buffalo, New York having the highest increase. Those who made down payments over 20% from January 2019 to March 2020 made up 47% of mortgage applications. This rose to 70% from April through October of this year.
Since COVID-19 upended American jobs in March, the federal government has pumped $3.5 trillion into the economy, including $2.6 trillion in spending and $900 billion in tax relief. Tendayi Kapfidze, LendingTree’s VP, Chief Economist, says in his report that this fiscal stimulus may have helped contribute to the housing and mortgage industry’s success this year.
Extremely low mortgage rates had a huge impact on the housing market’s boom in 2020, and Kapfidze explains that “mortgage rates are being driven lower by the Federal Reserve’s monetary stimulus through its aggressive bond-buying program.” However, fiscal stimulus from the federal government has also provided a boost to the housing market.
The LendingTree report states that “between 25% to 60% of stimulus payments were used to pay down debt or add to household savings,” which may have helped Americans lower their debts and increase their chances of being able to purchase a home. Data shows that there has been “a decline of more than $130 billion in credit card debt,” since the beginning of 2020. Stimulus checks may have been a helpful resource for Americans to help achieve this decline in debt.
COVID-19 has also driven more Americans to save—setting aside “$1.35 trillion more than they would have saved in a normal year.” This also was likely a factor that enabled homebuyers to afford larger down payments.
The LendingTree report notes, however, that saving money and paying off debt has not been a possibility for many Americans. Lower-income households continue to struggle with paying for basic daily expenses and housing.