Pandemic Homebuying Remorse
When COVID-19 struck New York City, dietitian Lisa Moskovitz was living in a two-bedroom apartment in Manhattan with her commercial banker husband and 2-year-old twin boys. They had no balcony, no rooftop—no escape from the panic unfolding around them.
After a few months staying with parents in suburban Long Island, they began shopping for a second home north of Manhattan, in the Hudson Valley. They didn’t want to leave the city for good. But they wanted a place to retreat to where they would have more space to ride out the pandemic.
“We felt trapped. We felt like we had nowhere to go in case we wanted to get out of the city,” says Moskovitz, 34. “We thought this was the best compromise at the time.”
They found a new development next to a lake in Montgomery, about 90 minutes north of the city, where they could customize their yet-to-be-built home. Their four-bedroom, four-bathroom house on 1.5 acres is slated to be finished by the end of the year. Down the street from the 3,300-square-foot new home are neighbors who have llamas grazing on their property.
But now that the couple are locked in to a contract, at a significantly higher price than that area would have fetched just a year ago, they have begun to second-guess their pricey purchase. And it’s not just the money. Although COVID-19 hasn’t gone away, the availability of vaccines means that travel is an option again, so they don’t think they’ll be using it as much as they had anticipated. Plus, they’ll need to buy a car to commute to the new property, and figure out where to park it in the city.
Pandemic homebuying remorse has emerged as one of the secondary consequences of COVID-19. Amid fears of forced proximity to others and the need for more space at home for work and kids’ classes, many people snapped up property at the height of a juiced market, often waiving inspections and contingencies to make their offers more competitive. Others bought homes far from the city center, where they could get more space for less money.
That remorse is expected to rise as reality settles in, society returns to a semblance of normality, and those buyers face longer commutes, discover problems with their new abodes, and grapple with hefty monthly payments.
“Making the biggest financial decision of your life under duress is rarely the recipe for a good outcome,” says Greg McBride, chief financial analyst at Bankrate.com. “The novelty of that new home will wear off. The mortgage payments will not.”
Moskovitz admits that she would never have considered purchasing a home so far from the city if not for the pandemic. But she and her husband now plan to use it for holidays and to get out of the city some weekends. The rest of the time they plan to list it as a short-term rental to make some extra cash.
“We were totally feeling claustrophobic in the city. We were acting out of a little bit of panic,” says Moskovitz. “We went a little nuts. We didn’t think it through.”
More people made impulsive decisions during the pandemic, says Jelena Kecmanovic, a clinical psychologist based in the Washington, DC, area.
Purchasing a home during a public health crisis, social unrest, and political turmoil offered a sense of control, she says. It allowed buyers to feel like they were protecting their families. There was also an element of peer pressure, as many saw their friends and neighbors buying larger homes or moving out of the cities.
“We were constantly in this state of anxiety for a long time. The part of the brain that helps us make more deliberate decisions just wasn’t working as well,” Kecmanovic says. “No wonder we made decisions we deemed imperfect later.”
Buying a home under pressure can be a costly mistake
Thomas Jepsen, 29, found himself in a race against time when he learned he had to move in a hurry.
When the pandemic hit, he was living in a small home in Raleigh, NC, he owned with his wife and was working on launching an architectural startup. A venture capitalist was eager to fund the project, called Passion Plans, on one condition: Jepsen would need to relocate to Atlanta.
In March, he and his wife went to Atlanta to look at homes. They found two they liked and put in offers over the asking price. Their real estate agent seemed confident they would get one of them. But in this highly competitive market, where the shortage of homes for sale has led to record-high prices, Jepsen “underestimated the craziness of the market,” he says. They lost out on both.
The couple found a listing for a four-bedroom, three-bathroom house in the Atlanta suburbs at roughly 2,800 square feet—more than double the square footage of their Raleigh home. Jepsen worried if he waited to see it in person, it would be gone by the time he got to Atlanta. So he pored over the listing photos and asked his real estate agent to do a walk-through.
Once the agent gave him the green light, he put an offer in for $30,000 over the asking price—without ever setting foot on the property. He waived the inspection to make his offer more competitive, since his agent assured him everything looked good. They closed on May 1 of this year and moved in shortly after.
But as Jepsen walked around the home for the first time, he spotted obvious cracks in the foundation. Had he toured the property in person, he says, he would never have made an offer for the house. It will cost him about $50,000 to fix.
“I arrived at the house and thought, what did I get myself into? … It was bad,” says Jepsen, who plans to have the foundation fixed in spite of the cost. “I’m severely being punished for poor planning.”
Others are regretting moving far away from their jobs
One of real estate agent Brian Mason‘s clients bought a home in the Virginia exurbs about 40 miles outside of Washington, DC, during the pandemic—and regrets it so much that he already plans to put the home back up for sale.
Mason’s client thought he would be able to work remotely indefinitely when he bought a home farther out, where he could get more square footage for less money. But after being called back to the office three times a week, the recent homebuyer realized just how bad the traffic is. So Mason’s client hopes to sell the home early next year, once he can do so without taking a financial hit, and buy something closer to his job.
Mason, who has seen about half of the buyers he worked with in the past year move to outer-ring suburbs and exurbs, expects to see more people regret their decision once the dust settles.
“It’s still pretty early,” he says, noting that many people haven’t returned to their offices yet. “It hasn’t hit everyone yet.”
But many of those suffering from buyer’s remorse may be stuck—at least for a while. Selling a home isn’t cheap and the market, while still hot, is a little less competitive than it was even a few months ago. So someone who bid well over the ask price could be out tens of thousands of dollars if they turn around and put the home back on the market.
“There are significant transaction costs to changing your mind and reversing course,” says Bankrate.com’s McBride. That’s particularly true for those who have less equity in their new abodes. “If you made a modest down payment, you may not have the equity to get out of that place.”
Kecmanovic cautions unhappy homeowners to wait until daily life gets closer to normal before making the big decision on what to do with their new abodes. She encourages them to test out the commutes and discover things they love about their homes. Otherwise they could regret those decisions as well.
“So many things are still shifting,” she says. “Give it some time.”