Coronavirus, or COVID-19 pandemic has shaken the world’s economy to its core. The citizens are being asked to stay home, restaurants and cafes are mostly being closed and people are advised to work from home. One of many industries that have been hit with this global disaster is real estate. How will this global quarantine influence housing market?
Changes in Demand
Unlike in some other industries who are already dealing with damage, the full impact of Covid-19 on real estate industry and housing market will be noticeable in several months, maybe even years.
During the first two weeks of March, real estate related searches have dropped 23%, according to Google Trend. At the same time, Redfin data shows that the nationwide home-buying demand went down from about 27%, which is how high it was in both January and February, to only 1% in March! All of this information shows that Americans simply aren’t in a mood to buy houses – and for a good reason, of course.
The first housing market predictions for Milwaukee, Wisconsin in 2020 were overall positive, especially as in February existing home sales were on their highest point in last 13 years. Then, COVID-19 happened, and in early March mortgage rates hit historic lows, and Redfin marks extreme lows in search rates of anything that is related to buying or selling a house. In fact, in the week that started on Monday 16th March, Redfin put a temporary suspension on all open houses as part of drastic measures to stop the spread of the coronavirus. All in all, the real estate market has taken a hard hit and it is noticeable in just a few days since the virus outbreak.
Still, despite the 30-year-fixed mortgage dropping, the mortgage applications are rising, according to Mortgage Bankers Association’s weekly survey, which means that there is still hope that the housing market will be changed, but not truly damaged.
What Does all of This Mean for Buyers and Sellers?
Well… both good and bad things.
For some buyers who are looking how to get a house at a low price, this could be a unique opportunity, as even just during the beginning of this recession the mortgage rates all over the housing market are extremely low. So, if you are planning on buying a house in Milwaukee for a low price, this can be the right time for you. However, keep in mind that fewer houses on the market also mean higher prices, but the monthly payments are remaining affordable.
At the same time, buyers should expect bidding wars if they decide to buy their house in Milwaukee during or right after the Coronavirus outbreak. As the number of houses remains low, the competitiveness between buyers will grow, especially between those who want to get use of those low mortgage rates.
As for sellers, they should adapt to the current situation on the housing market. Houses are still being sold, despite at a slower pace. Instead of open houses, organize virtual tours. Stream your house via video chat. If you aren’t good with technology or insist on showing your house “in person”, try to organize private showings instead of hosting traditional open houses. Avoid being in smaller rooms, such as bathrooms, and try to keep personal contact to minimum! Wear protective gloves, and bring hand sanitizers and wipes with you all the time. Try to limit number of showings, so you can disinfect everything between two showings.
The current state of the market is also looking good for iBuyers, whose industry can benefit a lot from this situation, as they buy houses while all the contact remains completely on the internet. Still, the supplies of houses are limited and according to Google Trends – the statistics can be found on Point2Homes website – even with iBuyers the interest is dropping. The traffic went down on all of the real estate related sites, no matter whether the site is for buyers or for sellers.
Can the Impact Be Predicted?
COVID-19 is a wild card and our previous experiences with its impact prove that everything about it is completely unpredictable. The economic uncertainties are bringing most people away from wanting to buy a house, and the reasons for it are many. Maybe you are worried about your finances as your job is being endangered or their stock portfolios aren’t doing well. Maybe they are worried about their health. Whatever the case is, people aren’t seeing the point in rushing anywhere now.
At the same time, homeowners are worrying that their homes won’t sell for a good enough price so they are hesitating putting their house on the market. The same happened during 9/11 and the 2007-2009 Great Recession, except then the consequences and the lasting period of the recession could be predicted – to a certain extent. This crisis is unique because we have no idea for how long it will last and what the true extend of the damage will be. Also, people are trying to save every penny worrying what will happen tomorrow, so it is noticed that more and more people are moving back to their parent’s house, or that they are turning their offices into rooms for their grandparents, who are at a higher risk of complications from the virus.
National Association of Realtors conducted a quick survey on March 16-17 on a sample of 72,734 members and came to a conclusion that the buyers interest has decreased to 41% in states and areas where there are a lot of cases of confirmed or presumed COVID-19 infections. At the same time, the percentage of sellers who have removed their homes from the market increased 9-16%, depending on where the houseseller is located.
In short, no one is really sure what the final impact of COVID-19 outbreak will be, or how severe will the long-lasting consequences be. What we can say with high certainty is that no market and no industry will stay exactly the same and that the changes will be made worldwide.
If you want to learn more about COVID-19 and how to stay safe, please check the following links: