The U.S. real estate market started on a great note this year. Then the Covid-19 pandemic struck, halting the spring homebuying season in its tracks. The novel coronavirus has already claimed over 102,107 lives in the U.S.
In April, over 20 million jobs disappeared. Business organizations and industries across the U.S. closed, while more than 300 million Americans shelter in place. If you’re looking to buy a house, the dark clouds gathering over the market and buying season can make you think something isn’t quite right, and rightly so.
Will the outbreak cause the real estate market to shut down, just like the 2008 financial crisis? Let’s find out, shall we?
Usually, rock-bottom mortgage prices and low housing inventory would make homebuying season competitive. While recessions have only a little effect on the real estate market, the Covid-19 pandemic has made the housing markets unstable. Following the Corona Virus outbreak, Web traffic to real estate portals reduced drastically. Homes for sale reduced by 63% in some markets like California and New York.
Applications for Weekly mortgages also dwindled by 17.9 percent. However, the local conditions in each city will determine the effect. A report shows that the northeast real estate markets are more at risk.
The housing market is getting on quite better in Boston as single-unit home sales remain stable despite property market lockdown. The Los Angeles state government suspended private home showings and open houses, while New York City home sales have come to a halt. As a result, much of the housing market has resorted to digital systems to keep the industry running smoothly.
In March, the US government enforced a moratorium on foreclosures to give forbearance on home loans. Although this key measure will help avoid a surge of foreclosures, it’s not all sunshine and rainbows. This action could bankrupt mortgage servicers who would abruptly be caught in a forbearance dilemma.
Leading mortgage servicers like PennyMac have taken measures to protect themselves since they don’t want to be held responsible for paying interest and principal to investors. And since the government has not explained what will become of servicers as mortgages go into forbearance, the chances are that other aggregators will make the same move.
Where the Real Estate Market Stands Presently
A few states are easing restrictions by reopening some business gradually, while others are yet to reopen. This event has created an irregular trajectory for the US real estate market as it records its rebound from the economic recession. As sellers and buyers tentatively re-engage, watch out for these metrics to scale where the United States real estate market is headed.
Demand for Homes
The demand for homes is now 5.5% higher before the Coronavirus pandemic. While the entire housing market might not record a recovery, demand will bounce back. The quick recovery is as a result of lifting stay at home orders, virtual home buying solutions, and low mortgage prices. Take Seattle, for example, home prices have increased dramatically as a result of the shortage of homes for sale.
In Texas, since Gov Abbott declared the reopening of business, contractors have reported increased sales, with many regaining close to original sales plans. If the present home sales follow this pattern, there will be massive improvements in June.
The situation in other states isn’t encouraging: demand is at near-record highs, and supply is almost at an all-time low. As the country relaxes social distancing measures gradually, and as demand for homes returns in the spring home buying season, the positive buying trend will continue.
Time on the Market
In May, the time listed homes spend on the market increased by 13 days compared to last year. That is a huge gap between when a home is listed for sale and sold since 2013. However, it doesn’t mean that home shoppers are buying since they are now searching for homes. According to a study, 40% of the agents who participated said that home buyers are delaying payments with “a few weeks.”
The high number of jobless claims in the US has a tremendous controlling influence over the real estate market. If the unemployment rate keeps increasing, housing dynamics will change. Some homeowners might choose to de-list their homes, while others might sell to acquire the liquidity in their homes and reduce the housing-related expenses.
The real estate market appears like it will bounce back once the pandemic allows it. Some home sales dropped abruptly in March, they’ve started rising again in April, says Zillow. However, since the time required for closing takes about 35 to 45 days, the recovery process might be gradual.