The weather is warming, the signs that summer is afoot are all around us and we are officially living a new "reality." Historically, spring and summer months in the real estate market are bustling with energy and excitement. As we know, nothing about 2020 has been typical or could even be described as remotely normal. The unemployment rate is at 14%, the battle against COVID-19 is raging and has now become a political hot button. Home schooling and distance learning is a new reality, and for many workers, remote working is, and will continue to be, the new norm. Mortgage interest rates remain low and so does real estate inventory.
The one thing that we have been able to come to rely on as a constant truth, is the uncertainty of the times we are living in. One area of uncertainty that I field questions about on a daily basis is the real estate market here in Central Oregon. More specifically, the common question is: Will there be a crash and when is it coming? Unfortunately, my trusty crystal ball is out of commission. That said, market data and the new trends we are seeing emerge provide some great information on how the real estate market will survive the economics of COVID-19.
One thing that real estate industry professionals know to be true is the effect of interest rates on the market. With interest rates remaining incredibly low and forecast to remain so throughout 2020, we have and will continue to see this fuel market activity. Buyers who were preparing and planning to buy pre-COVID-19 are still active and very much a part of the market. Many buyers are taking advantage of the lower interest rates and lack of inflation, resulting in an active and competitive market. With inventory about 30% less than is typical for the spring and summer seasons, that has fueled a more competitive market and supports the pricing. As in any industry and market, demand drives the pricing. Hence why we have seen a 5% increase in pricing of 2019 and that percentage is holding steady on a national level.
Why won't we see another major real estate crash in the near future? To begin with, lending criteria is far different from the days of 2005-2008, when one's dog could get a loan on a stated income application. Buyers who are purchasing homes meet the much more stringent debt-to-income ratios required to qualify for a mortgage. In addition, homeowners have much more equity in their homes now than those during the Great Recession.
As we look forward to the future, the changes in the workplace, with a large percentage of the workforce now looking to continue to work remotely and many companies adopting this model, people's homes are more important now than ever. During this crisis, people's homes were where safe haven was created and found. People's homes are now schools and schoolyards, and for many will continue to be in the coming seasons ahead. Thus, making real estate even more important to people than it has been in a very long while. When there is value beyond just the dollars, those markets don't crash.