As investors and homeowners grapple with concerns over the value of their investments, many are asking the question; “How will Coronavirus (covid-19) impact the value of my home or investment properties?”. While it’s still early EffectiveAgents does have some insight on how Coronavirus might impact the US real estate market.
The Impact Of Coronavirus on Real Estate Markets Won’t Be Clear Until Summer 2020
The sales cycle in real estate is so drawn out that it’s difficult to tell how the novel virus will impact US real estate markets, nevertheless, there are some leading indicators that are suggesting that housing inventories may rise. For example, showing data has dipped over the last few weeks, meaning there are fewer buyers out looking at homes right now. January through April are always slow months because of winter’s grip on most of the country. In the US and most health experts expect the virus to taper off after temperatures warm up. HUD data released in February showed a very strong residential real estate market but this data doesn’t reflect the potential fallout from the virus. EffectiveAgents.com has been concerned about overall housing inventory for several months, so, an increase in overall inventory is actually a welcome event that could bring some stability to this relentless seller’s market.
The EffectiveAgent’s team believes that any decrease in demand for housing because of Coronavirus will be somewhat offset by the undeniable temptation of historically low mortgage rates. Further, growing housing inventories would be a welcome and positive development for the US real estate market.
Reasons Coronavirus will have a muted impact on the US real estate market
- Housing is seen as a safe haven, free from stock market gyrations.
- An increase in “staying at home” will inevitably spur interest in ownership and home improvement projects.
- A decreased emphasis on travel, dining out, and public events leaves more budget for investment inside the household.
- Fear of nursing homes could encourage even more seniors to “age in place” which further reduces overall housing inventory.
- Massive government stimulus helps homeowners and potential home buyers “weather the storm” for the next few months. When the sun shines again, “Home” will be more important than ever.
Potential headwinds for US real estate markets
- Areas where there is substantial high-risk industry concentration could see a rise in foreclosures. Industries like oil and gas, vacation destinations, and airlines tend to support large regional employment rolls. We see trouble ahead for these markets.
- Supply chain disruptions could force unexpected corporate layoffs which could increase the number of overall foreclosures.
- The vacation housing industry will be very weak 2020. This will put extreme pressure on homeowners that rent homes on platforms like AirBNB.
- Many service sector jobs face major disruption, especially restaurants, bars, salons, etc. Many of these tipped employees aren’t homeowners and their employment woes will impact their landlord’s bottom line.
Overall, housing inventory is so constrained right now that extra “distressed” inventory will be absorbed by home buyers that have been on the sidelines for some time. EffectiveAgents.com believes that Coronavirus will have a substantial impact on the real estate market in Q2, this year. We do, however, expect the summer buying season (Q3) to be the strongest it’s been in a long time.
Are you considering selling your home?
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