It could take a while for our economy to return to pre-pandemic form.
The Back-to-Normal tracker from CNN and Moody’s Analytics says since October, the economy has been stagnant, operating around 80% of its pre-pandemic level.
But despite the difficulties that so many families are still experiencing, the New York Federal Reserve recently released a report that shows some encouraging signs.
According to the data, the mortgage balance, or the amount owed at a particular point in time during a mortgage loan, in 2020 grew by $182 billion, the largest increase since 2007, which shows the housing market has exploded.
“Once this low interest rate gave an incentive, people are going outright crazy refinancing, as well as buying new houses,” said Kishor Kulkarni, a distinguished professor of economics at Metro State University in Denver.
Kulkarni says buying took off last year after the Federal Reserve slashed interest rates to near zero to fight the economic fallout from the pandemic.
A big shift in working and learning from home also led people to look for a place with more space, he says.
“I think the lower interest rates on mortgages is a clear invitation to repay all your debt, so if anybody who has a debt of more than 4% should refinance their house and repay that,” said Kulkarni. “I think that it makes all the sense in the world.”
Chase Marchetti was one of those people.
A 30-year-old touring musician, Marchetti has never lived under the contract of a lease for more than 18 months. Once the pandemic stopped his touring around the country, he figured it was time to settle down and purchase a property.
“I felt like everything was happening so fast. It was so intense,” he said. “Opportunity; it was there.”
Not only did home buying go up, but according to the data from the New York Federal Reserve, debt also decreased by billions.
The data shows credit card balances were $108 billion lower in December than the same time in 2019, the largest yearly decline since the report began in 1999.
Kulkarni says moving forward, the lowered debt could help the economy down the road as people have more disposable income with extra money saved on interest.