Without a crystal ball, it’s impossible to say exactly what the coronavirus pandemic will do to real estate — but we can make some educated guesses based on what we know about economics and the market in general.
Here are the variables to watch that will determine how coronavirus impacts real estate down the road.
There has been a very noticeable drop in pricing.
At the beginning of the year we were seeing rapid home value appreciation, as the stock market began to reel we noticed demand dropping, and within two or three weeks home values had plunged.
Home values from where they were at the height of the spring probably dropped close to 10%-15%.
We’ve seen a strong seller’s market at the beginning of this year due to low inventory and a healthy local economy.
That has changed now that the area has shut down. The biggest impact the virus has brought is the weekend buyer demand. Although the virus has also impacted the number of homes for sale, the buyer demand has slowed down to levels where most homes are just sitting on the market and many are not moving.
The impact the virus will have on the market ultimately depends on the duration of the virus. As of now that is hard to determine. The federal government has implemented stimulus to keep banks, businesses, and people afloat but the intention was for a very short period. If the impact proves to be broader then expect more stimulus, but worsening conditions for sellers.
Low Home Inventory
There’s no doubt that sellers have become a little wary of listing during the pandemic. While that weariness is certainly keeping some would-be sellers from listing their homes, other sellers don’t have the luxury of waiting out the virus. Moves, divorce, death, or serious financial troubles will require some sellers to put their homes on the market.
In our local market, sellers have been reluctant to drop their price. Hoping that as restrictions ease the market will resume and pricing will start to go back up.
What as stabilized the market is the low inventory, sellers firmness on pricing, and the few buyers that are taking advantage of the market at this moment.
Sellers in this market
Sellers are hesitant to list because they believe the virus is preventing people from buying. The truth is that you are able to buy and sell at this time, but the uncertainly is weighing in on both buyers and sellers causing low inventory and fewer serious buyers.
Until inventory levels go up, prices are unlikely to change significantly.
In mid-April, mortgage rates hit a 30-year low, falling to 3.45% for a 30-year fixed-rate mortgage. Even with the extraordinarily low rate, mortgage applications were down 35% from a year prior. Just recently new mortgage applications began to rise.
Despite the recent economic turmoil mortgages are still being funded
Lenders are raising requirements on credit scores and down payments making it more difficult to qualify for a loan.
Overall the market remains strong. Homes are selling. Depending on how you perceive it. Buyers are getting a better deal right now on homes then what they would have had this pandemic not occurred. With that, the buyers are assuming the risk moving forward.