The aftereffects of the Coronavirus have our nation uncertain about the future of our economy. With jobs being put on the line, businesses being closed, and tourism at a halt, it is only normal to be a bit wary.
These unprecedented times have future home buyers and home sellers questioning the housing market. Here, we ease some of those fears as we go over the possible outcome COVID-19 will have on Real Estate.
Some good news
Even if the housing market starts to show a downturn, economists do not predict a recession any where near as bad as the Great Recession.
This is due to the large decrease in subprime loans after credit requirements became stricter after the housing bust. Additionally, homeowners are more likely to have considerable equity in their properties due to increasing home prices. This is good news for homeowners who may fear financial losses.
Chief Economist of Realtor.com ®, Danielle Hale, says “I would expect this to be milder. There’s no dysfunction in the banking system, we don’t have [many] households who are overleveraged [with their mortgage payments] and are potentially in trouble.”
What about home sales and prices?
Realtors have been noticing an increase in sellers taking their homes temporarily off the market due to shelter in place orders. Also, mortgage lenders have been offering borrowers deferment and forbearance options during this time. These options help homeowners avoid a short sale or foreclosure. These two factors have contributed to the slight decrease in home sales.
As for home prices, with mortgage rates currently being at an all time low, the supply and demand in the housing market has been unbalanced. There has been a shortage of inventory. Because of this, experts predict that house prices will not be dropping any time soon.
Who is most affected?
It comes as no surprise that the Real Estate markets that will be most affected by a possible decline are those in the travel, tourism, and hospitality sectors. These markets have all been directly affected by the virus and may take a little bit longer than others to recoup their losses.
Home builders have also been hit by the Coronavirus. Prior to COVID-19, construction starts had spiked dramatically. Now, many builders have had to put projects either on hold, or pace may be slowing due to supply lines being disrupted.
It is understandable to be uncertain during this time of change, but we do not have as much to fear as we think. According to a market report from Zillow, pending home sales dropped dramatically in March but they’ve begun rising again in April. The timeline for a home sale could take a few months so the market recovery will be gradual. However, there is light at the end of the tunnel.