Coronavirus Real Estate Trends Coronavirus Real Estate Update: Is a Buyer’s Market on the Way? by Eman Hamed April 12, 2020September 10, 2020 by Eman Hamed April 12, 2020September 10, 2020 The US real estate market enjoyed a hot seller’s market at the beginning of 2020. But that was before the coronavirus outbreak and the following economic slowdown across the country. The COVID-19 pandemic has thrown the spring housing season – which was expected to be a strong one – into disarray. As people are urged to stay home, the market has ground to a halt with sellers questioning whether they should sell their homes and buyers feeling a little more skittish. The critical question people are asking is whether or not a buyer’s market is coming months from now or whether markets will stabilize and then we’ll see a return of the hyper-competitive market we had just a month ago. Real estate experts say it’s too early to make any US housing market predictions about what the mid/long-term fallout will be for the industry with any level of certainty. The fact is, the US has never experienced a complete economic slowdown like this and no one knows how long the coronavirus is going to keep buyers and sellers at home. However, what we can do is look at the real-time/near-term impact the pandemic is leaving. In this blog post, we’re taking a close look at how COVID-19 is affecting the factors which typically would create a buyer’s market. This would allow us to answer the question of what we can expect to see in the coming months: a buyer’s market vs seller’s market? Coronavirus Impact on Home Sales The first factor to determine whether the US housing market favors sellers or buyers is home sales. Home sales have been affected the most by the coronavirus as real estate activity has slowed in most markets. The main reasons for that include the imminent surge in unemployment and the difficulty of showing homes during the pandemic. According to a recent survey released by the National Association of Realtors, real estate agents across the country have canceled open houses and almost half of them reported a drop in buyer interest. In addition, the recent stock market crash has also made some would-be buyers less wealthy, which is a big problem for the upper-end of the real estate market. Furthermore, some sellers are pulling their homes from the market believing that now isn’t the right time to list. They fear that they won’t get a good price due to the drop in demand. This decline in confidence coupled with the unprecedented measures taken to stop the spread of COVID-19, including major social distancing efforts, will naturally impact home sales. According to a new analysis by Capital Economics, home sales across the nation could fall by 35% annually this spring compared with the last quarter of 2019. This means total home sales would reach around 4 million annualized, the lowest since 1991. However, despite the fact the COVID-19 has made things more complicated, social distancing orders have not stopped home sales entirely. On March 28th, the US Department of Homeland Security Cybersecurity and Infrastructure Security Agency added real estate activity to the list of essential businesses. A number of state governors, accordingly, decided to permit home buying and selling during this time. This means that real estate agents may start to find clients coming back into these real estate markets. With homes put up for sale that need to be sold during this time and buyers being allowed to proceed with purchases, a buyer’s market may emerge. Among the US states which allowed real estate activity to continue are: California real estate market Connecticut real estate market Illinois real estate market New Hampshire real estate market New Jersey real estate market Washington real estate market Wisconsin real estate market Florida Real Estate Market Related: Real Estate Deemed Essential Business During COVID-19 Pandemic Coronavirus Impact on Home Prices Some people fear that the coronavirus pandemic is going to cause home prices to rise and create a housing bubble which will then lead to a repeat of the 2008 housing crisis. However, real estate experts don’t see this happening in their US housing market forecast. It’s important to understand that there are differences between the Great Recession and the market slowdown we’re currently experiencing. First, the 2008 housing crisis was a mortgage-based crisis, which is why the real estate industry was hit directly. Second, home prices were up despite high supply because demand was artificially high due to irresponsible lending practices that allowed people to buy more than they could afford. As for today, the mortgage industry is much more conservative than before with strict debt-to-income and credit limits. Meaning, the recent price appreciation is driven by a more natural supply/demand curve: low supply as we’ve run out of land to build on and strong demand from more qualified borrowers. Related: Will the Coronavirus Cause a Repeat of the 2008 Housing Crisis? As recently as December, the National Association of Realtors predicted that home prices would grow by 4.3% in 2020. However, since the spread of COVID-19, the association said it doesn’t stand by that number anymore and so far hasn’t offered a new US housing market forecast. Nevertheless, Lawrence Yun, the chief economist for NAR, doesn’t predict home prices to drop either. He believes that “with fewer listings in what’s already a housing shortage environment, home prices are likely to hold steady.” When it comes to sellers, they have either taken their properties off the market or sold at less than they wanted. Real estate agents reported that properties still on the market now are “priced to sell”. While sellers don’t love the buyer’s market, it seems that they’ve accepted the new reality and priced their properties accordingly. As a result, some experts believe that the US housing market 2020 will favor buyers once the health crisis is over. If prices come down, real estate investors could be in a better position to buy. Mashvisor wants to make sure you’re buying profitable investment property during these times when making wise investment decisions is critical. If you come across a real estate deal, remember to analyze it using proper tools like the Investment Property Calculator. You can now use this promo code to access Mashvisor’s real estate analysis tools and get 15% off all Mashvisor plans. Low Mortgage Rates Encourage Buyers COVID-19 has forced the Federal Reserve to cut interest rates twice since the start of the crisis in an effort to protect the economy against the fear and disruption. This sent mortgage rates to all-time lows, which usually boosts home sales. Many buyers are now wondering whether they should take advantage of current conditions. It appears that smart buyers have taken the steps to benefit from low interest rates. Lenders have been reporting a spike in mortgage and refinance applications. If interest rates stay at these historic lows or go even lower, people will become motivated to make offers on homes for sale in some housing markets. But will rates continue to drop? Some experts like Ryan E. Beverage, a senior mortgage advisor in Southern California, believe it’s a possibility: COVID-19 has created a global emergency at this point. That has been the sole reason the stock market has seen the biggest losses in history, which has forced the Federal Reserve to drop rates as well. When stocks go down, interest rates do, too. It’s when we see the market starting to rebound when rates will go back up. But if nothing changes soon, interest rates more than likely will drop even further. On the other hand, other experts have different opinions. Mortgage rates may be low, but some experts believe this is not enough incentive to make an offer as potential homebuyers still face more pressing concerns. With the record number of people out of work and claiming unemployment benefits of the CARES Act combined with market instability and a general feeling of public hysteria, it’s no surprise that people are not entering the buyer’s market. They don’t think of the low interest rates as a good deal, but as a cushion to soften the blow of any unexpected inconveniences. When Will It Be a Buyer’s Market Again? Unlike the 2008 housing crisis, the impact of COVID-19 on the US real estate market is not expected to last nearly as long. Demand for housing was especially strong before the coronavirus hit the US, mainly due to favorable demographics and strong employment. Hence, the pent-up demand from the spring buying season should help home sales recover by the end of the year and into 2021. Plus, uncertainty in financial markets could push investors to pull out of the stock market and, instead, invest their cash in real estate. While travel restrictions might prevent foreign investors from looking at investment properties in the US housing market, local investors might want to take advantage of the buyer’s market. Another indication of what might happen comes from Zillow’s deep dive into previous pandemics. During the COVID-19 outbreak in China, for example, there were fewer homes for sale and transactions nearly ceased, but the prices of sold homes were not reduced much. Obviously, what happened in other countries may not reflect what will happen in the US housing market 2020. And because markets go up and down so dramatically each day, no one knows with complete certainty what the long-term impact of coronavirus on the real estate market is. However, we can still hope that the market is simply on pause until the threat of COVID-19 passes. To stay informed on developing coronavirus real estate trends and how housing markets across the US are doing during this crisis, check out our blog where we publish daily coronavirus real estate updates. Final Words for Real Estate Investors The coronavirus crisis has disrupted the housing market. However, it’s important to remember that many cities were already in buyer’s market territory in 2020 prior to the COVID-19 pandemic. Hence, sellers were well aware that they didn’t have the upper hand to begin with. Meaning, if you’re in the process of buying an investment property, the novel coronavirus does not have to stop you. Depending on your appetite for risk, the coming months might actually prove to be a good time to invest in real estate. Mortgage rates are still low and listing pricing may fall if sellers keep worrying about buyers dropping out. As long as your job is secured and you have your finances in order, you may be able to snag a good real estate investment. Related: What Is a Buyer’s Market and How to Find One? Remember to use Mashvisor’s real estate investment tools to search for and analyze the best properties for sale with high returns on investment in your city and housing market of choice. To learn more about how we will help you make faster and smarter investment decisions whether you’re in a seller’s market or a buyer’s market, click here. Start Your Investment Property Search! START FREE TRIAL Buyers MarketMortgageProperty PricesSalesSellers Market 0 FacebookTwitterGoogle +PinterestLinkedin Eman Hamed Eman is a Content Writer at Mashvisor. With a focus on market reports, she enjoys researching the state of the real estate market in different cities across the US. Eman also writes about trends, forecasts, and tips for beginner investors to gain the confidence and knowledge they need to make wise decisions. 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