Throughout 2020 and into 2021, the coronavirus has continued to keep people in their homes, businesses all around the world are facing inactivity and consequential shutdowns. But how did COVID-19 affect the real estate market?
The novel coronavirus was declared a pandemic in early March by the World health organization. And while initially, the crisis had only seemed a healthcare scare, it later turned economic at an alarming pace. To curtail the spread of COVID 19, governments across the world issued stay-at-home orders for citizens, and some even locked down entire regions. With people staying home, the rate of unemployment flared, causing at least 10 million people to lose their jobs in the United States of America alone.
How Did Coronavirus Impact Real Estate?
The relentless virus outbreak has impacted the housing market by reducing business activity overall, which is likely to lead to reduced housing prices. Real estate price in coronavirus is expected to ebb but not in the near future.
What started out as a strong year for the housing market as anticipated by economists, 2020, suddenly seemed like a bleak time for housing transactions. With record-low mortgage rates and a dearth of housing inventory, spring of this year was set to witness an intense home-buying season. But due to social-distancing and unexpected financial constraints, potential house buyers have put their wish of owning a home on the back burner.
Furthermore, estate sellers are taking their properties off the market in the wake of a decrease in normal spending. While the changing demand and supply dynamics in the housing market have slowed down business activity, home prices are expected to hold their footing at least for a while.
Zillow conducted a survey to examine the effect of a pandemic on housing prices during previous outbreaks and concluded that while buying and selling slowed the prices largely remained the same. However, when homeowners were faced with a dire financial crisis, home prices saw a slight dip.
Long-lasting emergencies, like pandemics, can leave many low on disposable income and wary about spending what they do have. This is when the market typically sees property prices lowering. In most cases, property owners ride out the economic burdens of a pandemic in hopes of getting a high price for their estate post-pandemic.
Coronavirus put the Housing Market on pause
Currently, the novel coronavirus has put the housing business across the world on hold. Buyers and sellers are waiting for the crisis to pass to carry out any home transactions in most parts of the world. The British newspaper, The Guardian, reports that the housing industry in the United Kingdom has gone into a deep freeze as house sales drop tremendously. While in America, online traffic to real estate websites has significantly slowed down, and there has been a 50-75% drop in property listings.
Some states and regions are more impacted than others. According to a report published by ATTom data solutions, housing markets in Florida and the northeast are facing a historical lack of business activity due to the coronavirus. In New York, most housing transactions have ceased as the state continues to be the epicenter of COVID 19 in America.
However, in Boston, the housing markets are not suffering as much as in other regions. The report states that single-family home sales are maintaining their usual pace of business even in the pandemic. When in-person showings of housing were completely banned in LA, top realtors resorted to virtual house tours through online portals to maintain business activity in the time of corona.
The Government takes Action
The housing market is teetering on the edge of complete loss of business activity even with the shifting government policies on mortgage loans. The Federal government has issued a moratorium on foreclosures in the States to reduce the financial burden on mortgage loan borrowers.
The newly granted leniency on loan payments has been set in place to make sure that the middle and lower-middle-class get through the medical cum economic crisis without losing shelter. However, the shift in the foreclosure policy is expected to impact mortgage loaning companies gravely. With the governmental sanction to borrowers to delay loan repayments indefinitely, many mortgage agencies face the possibility of going bankrupt in the future.
Even with low mortgage rates and the government’s measures to help Americans keep paying for the things they need, the housing market moves towards stagnation. According to Fannie Mae, real estate price drop in coronavirus seems unlikely, at least in the short term. And if anything, the lack of housing inventory is more likely to increase the prices, even if unsubstantially.
In a recent report on the housing market in America, Fannie Mae has suggested a 15% drop in house sales in 2020. Thanks to the pandemic, the dwindling business activity in the housing sector can corroborate that.
Light at the End of the Tunnel
According to the Fannie Mae report, the median price of an existing home will rise to $275,000 in 2020 from $272,000 last year, while the median price of a new home will go up to $326,000 this year from $321,000 in 2019.
The world is going through an unprecedented crisis right now, which has medical, political, and financial experts reassessing the situation daily. While the future of most fields seems uncertain at the moment, economists believe that the future of the housing sector is bright in terms of business activity post-pandemic. But the expected boost in business is subject to the course of the coronavirus. As we’re all used to at this point, the situation can change at any time.