Corona Virus and Real Estate
Just as the recent job numbers hit a high, the real estate market is making awakening sounds. The virus and shutdown took a heavy toll on the US economy and all economies.
The possibility of a housing market crash is weakening as the work shutdown is ending. With states opening up back to work rules, the economic forecast is bright. If Covid 19 infections continue to fall, the economy can revive.
Restaurants, airlines, hotels, salons, trains, subways, buses, and mass entertainment parks might be in for a rough ride. But there’s no reason to suggest the housing market will not rebound strongly.
The May sales volume and house prices numbers were as good as they could possibly be. Sales are suppressed due to a lack of listings. It’s economic uncertainty and the virus that are keeping people in their homes, unwilling to show and sell.
However, looking for a new home isn’t high on the priority list right now, and sellers aren’t listing their homes. In fact, they’ve taken the current inventory off the market. This chart shows just how strong the sales decline has been.
The drag on home sales and home prices was felt in all major markets for the spring period and will lag a little in the next 3 month, 6 month periods. Check out the major urban housing markets including Atlanta, Dallas, Miami, Los Angeles, San Diego, Bay Area, Chicago, Tampa, Houston, Sacramento, Seattle, and Philadelphia.
The Corona Virus shutdown didn’t hurt the stock markets much. The forecast for the NASDAQ, Dow Jones, and S&P is rosy after its run up this week. The feeling that the big issues are out of the way, even though we don’t have a Covid 19 vaccine. See the Corona virus stocks report about that.
“The impact of COVID-19 materialized in the latter half of March. Week by week, we are seeing decreases in new listings.” said Realtor.com’s Chief Economist, Danielle Hale.
When Will the Market Fully Return After Corona Virus?
Real estate will come back to life in about 3 months from now (July). Previous estimates of the housing market return (see Massachusetts Realtor Associations president’s projection below) didn’t account for the wildfire growth in cases that might not peak until mid April. The belief that warm weather and humidity will stop it, is waning. Everyone needs to be very careful.
Hopefully with the Federal aid, everyone will be able to get through to summer financially and still alive. Most states have a tenant no eviction policy in effect for 3 months, but at the end of that period, the evictions will begin. Of course, many landlords may decide to sell their properties for a number of reasons.
If the US death toll does reach 100,000 people it could indeed create more sales transactions in 2020.
It’s a very sad and frightening event, with populations in most countries not really comprehending how dangerous and easily transmitted the virus is. Medical experts have asserted their belief that it is direct person to person transmission only, but victims say they don’t know who that could have been.
Likely victims picked the virus up at bank machines, gas station pumps, door knobs, and personal conversations. There are so many physical objects people touch without realizing it, and it infects them so readily.
What Does Real Estate Look Like for April and May?
Forecasts are for a drop of 35% in sales nationally. This is as already arranged agreements get inked.
For the months of April and May, 30% seems low when you consider cities like New York and cities in New Jersey are under total shutdown. How can transactions be recorded in that environment, even with Realtors, bankers, and lawyers working remotely? Home inspectors don’t work remotely.
A more realistic guess is a 60% drop by end of April, and the sales slump will last into July. Certainly, some business will be done in the commercial sector by then, but the uncertainty of homebuyers and inability to get mortgages will prevent buying.
Homebuyers might be desperate for homes, but their employment is not secure. Many are going to find companies reorganizing with the new reality. Some companies will overreact to the downturn and lay off more than necessary.
Demand will fall dramatically? Will house prices fall? Prices will fall, but sellers rarely have to sell in a panic anyway. Most know they’ll get their price in 2021. A severe housing shortage ensures prices can’t fall too much. The real questions are: when prices jump back up and where could you possibly find a seller during an historic pandemic?
In a report on wbur.org, Massachusetts, Kurt Thompson, president of the Massachusetts Association of Realtors was quoted as saying “I think we’re going to see inventory levels decrease in the short term, the next 45 to 60 days… some agents that they’re absolutely as busy as they have been and they haven’t seen a significant turndown.”
Take a closer look at the 3 month, 6 month, and 5 year forecast for the US.