How the COVID-19 pandemic changed the housing market

If you find the purchase of a home beyond your reach, you can partially blame the COVID-19 pandemic.

The U.S. housing market has undergone a dramatic transformation since the pandemic began in March 2020. Over the past five years, home values and rents have skyrocketed, the number of million-dollar homes has surged, and the way people shop for homes has evolved significantly.

Nationally, home values have increased by an astounding 45.3% since February 2020, a growth rate that typically spans over a decade. Miami emerged as the hottest market, with home values and rents rising more than in any other major metro area. Tampa and Hartford also ranked among the top five for growth in both categories,” according to research by real estate marketplace Zillow.

Austin experienced extreme fluctuations, with home values soaring by 40.3% during the early pandemic frenzy but later declining by 14% as mortgage rates rose and new construction eased competition. Despite this, Austin's home values remain 37.8% higher than pre-pandemic levels.

In New York City, median asking rents have climbed 24.1% to $3,600, with the Bronx seeing the sharpest increase at 42.3%. As affordability challenges grew in Brooklyn and Manhattan, more renters turned to Queens, where rents began rising rapidly in 2022.

The million dollar home boom

The past five years have seen nearly a million more homes surpass the $1 million mark, bringing the total to just under 1,650,000 nationwide. The typical $1 million home has shrunk by about 70 square feet since the pandemic, now averaging 2,388 square feet with four bedrooms and three bathrooms. Cities like Indianapolis, Hartford, and Nashville saw the most significant reductions in home size.

In response to soaring demand, builders initiated over 1 million single-family home starts in 2021, the highest since 2007. Houston, Dallas, Phoenix, Atlanta, and Austin led in single-family permits, helping to moderate price growth and improve affordability. As mortgage rates rose, builders shifted focus to higher-density housing, such as townhomes and condos, to keep prices accessible.

During the pandemic, functional features like backyards became more desirable than stylistic elements. Outdoor features remain highly sought after, with buyers willing to pay a premium for amenities like outdoor kitchens and patios. However, some pandemic-era trends, such as "cloffices" and "Zoom rooms," have faded in popularity.

The rise of virtual home shopping

The pandemic accelerated the adoption of virtual home shopping tools. Buyers now spend less time touring homes in person, aided by advanced digital tools that enhance understanding of floor plans. Zillow reports a significant increase in listings featuring 3D Home tours, and innovations like Zillow Showcase are driving more engagement with immersive media.

The demand for virtual tools is growing, with 70% of buyers sayingthat 3D tours provide a better sense of space than photos, up from 52% in 2019. As a result, fewer buyers report wasting time on unsuitable properties or attending multiple open houses and tours.

As the housing market continues to evolve, these trends may point to the lasting impact of the pandemic on homebuying preferences and the real estate industry.