Will House and Condo Prices Fall?
Home prices around the world are about to take a tumble. The issue is the US consumer doesn’t have the buying power they once did. US consumers have been supporting the world for a long time.
The mid 2020 recession is making housing market bubbles vulnerable to a burst. See more on which cities could crash. Without jobs, unprofitable employers, and weaker financial situations, the housing market may not be able to rely on buyers to keep it buoyant.
Will the drop in home prices reflect the falling prices of stocks on the Dow Jones and S&P? It’s possible, and consider that although some stock analysts believe the worst is over for the stock market, the real economic impact hasn’t even hit the US yet. How the Corona virus will affect real estate?
Sales are rocketing downward. April is looking really tough.
And the word foreclosure hasn’t entered the popular vocabulary yet. The US government can’t pay everyone’s mortgage so we can expect some foreclosures to happen. So the questions a lot people are wondering is when will house prices fall, and by how much? This could contribute to some panic selling in April. How the Corona virus will affect real estate?
“Increasingly restrictive measures on people’s movement, and an imminent surge in unemployment, means we expect total home sales will drop by around 35% in the second quarter compared to the end of 2019. But the dip should prove short-lived” says a new report from Capital Economics.
Why will home prices fall? See factors below.
Corona Virus Shutdown: Top Cause of Dropping House Prices
The current recession is worrying a lot of housing market experts, economists and consumers because of how fast Corona Virus cases are rising in cities like New York. Of course, the pandemic will pass through the US and the recovery will begin.
“This week, home buying demand took a big hit, with year-over-year growth dropping from nearly 27% in January and February to 1% growth over the past seven days,” Redfin CFO Chris Nielsen said in a filing with the Securities and Exchange Commission. “Traffic growth to Redfin’s website has also slowed from around 20% through the first two months of 2020 to high single digits over the past week. — from a report in the Dallas Morning News.
Although inventory is low, and home construction continues during this recession, it’s inconceivable that housing prices won’t drop. The only questions is how much. And if sellers can’t get their big price demands, they’ll take the homes off the market. In New York State, the drop in listings is historic.
There is optimism in the industry (perhaps only me now) but it’s not based on current numbers, more on the the 5 year market forecast. The economy will regain its footing.
Could This Fall Become A Housing Market Crash?
Some are concerned less about home prices receding, and more on the possibility of a housing market crash. The cities most likely to crash are at much higher risk. Will home prices go down in the Bay Area housing market, Boston, New York, Atlanta, Philadelphia, Miami, New Orleans, Tampa, Phoenix, Chicago, Seattle, Sacramento, Malibu, Dallas, Houston, Austin, Fort Worth, Denver, and San Diego?
Are house prices falling up in Toronto, Montreal, Calgary and Vancouver? Corona Virus and falling energy prices are decimating Canada right now. Home prices are falling and will likely follow the same path as US cities.
California and Other Tech Sectors
The tech sector seems to be more resilient so that market is likely safe despite its ridiculously high prices. At watch for falling home and condo prices too is New York City. The shutdown there may be prolonged due to the severe Covid 19 outbreak and overwhelm of its its medical system.
A lot of wealth has been removed because little work has been done. Some estimates are that the US GDP will drop by 25% this quarter. Will the stimulus money be enough to keep the economy moving for several months? Likely not, so it’s important that companies begin work again as soon as possible.
The President’s 2 Trillion dollar stimulus bills has passed and the stock markets responded well this week. The US has the highest number of confirmed Corona Virus cases. Now the spring break beach scenes are starting to haunt a lot of people.
The state of Florida showed up red on the health warning website healthweather.us. The readings have dropped recently, however New York is rated in the normal range despite the fact NYC is in a Covid 19 outbreak.
How Far Will Home Prices Drop?
The data isn’t in, but many Realtors are reporting an almost 100% drop in in-person showings. The Dallas Morning News reported a 60% drop in Realtor showings. Who would show their home during a pandemic outbreak?
“We aren’t just facing an economic recession, we are facing an economic standstill,” said Robert Reffkin of Compass Realty.
Many have reverted to video and other online real estate presentation sites. Others have just given up until the Corona Virus shutdown ends.
But will buyers be in the market after a period of unemployment and concerns about their financial situation for the rest of 2020. And Millennial buyers may stay put in their apartment rentals because the status quo is safer. They may even be on the hunt for cheaper apartment prices. Will apartment rent prices go down? The rent market is much more resistant to falling rent prices, but landlords are likely to see falling occupancy rates.
Why Will Housing Prices go Down?
- home prices unaffordable — priced on speculation and high demand
- home and condo sellers panicking as market recedes
- buyers lose confidence in 2020 economic outlook
- fast rising unemployment (unemployment claims rocketed to 3.3 million last week)
- banks refusing to lend to risky buyers
- debt to income ratios will climb over the next few months
- interest rates and mortgage rates could rise
Experts and housing bloggers felt the economic forecast was so strong that the housing market would not fall, might be taking a closer look. A severe recession isn’t out of the question if this pandemic lasts, and the stimulus doesn’t work. That would be disastrous.
Yet these pandemics usually don’t last long. China appears to be over their outbreak so cities across the US might get through this unscathed. The New York housing market and the Dallas housing market (Texas oil prices) are the exceptions.
The fear of the virus returning next fall will hamper buyer demand too. Who would buy a million dollar house with fear in the air?
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