How the Coronavirus May Impact the Real Estate Market
You’re probably already well-aware of how the coronavirus (Covid-19) is affecting your day-to-day life, with toilet paper shortages everywhere and bottles of hand sanitizer non-existent at stores. Travel bans have been put into place, and almost every large gathering is canceled. Most people are working from home, and schools across the U.S. are temporarily closed.
It seems like everywhere you look, there’s more news on the novel virus and how it’s causing quarantines across the globe. All of these shut downs and changes to daily life are unsettling, but necessary in order to slow the spread. This is especially the case since the virus has been officially declared a pandemic by the World Health Organization.
You may be wondering what the implications of this global virus are on the economy and the real estate market as well. While we don’t truly know how this will affect the housing market yet, there are a few sources that have some predictions.
Will the coronavirus affect the real estate market?
The housing market can be affected by a variety of different factors. Even the weather has an impact, as the winter months can put a real damper on sales in most areas.
Surely the virus is bound to have an impact on the sales of houses and the overall market in general. But in which ways?
Louie Ortiz from The Louie Ortiz Group went on air with KUSI news station a few days ago to chat about how the coronavirus is affecting the real estate market in San Diego. He first mentioned that in response to this virus, “there are a lot of buyers and sellers out there that have taken a bit of a pause.” He stated that real estate agents may not be hosting open houses and sellers may be afraid to let people walk through their houses.
Ortiz also mentioned that instability in the job market may be causing a decline in home sales as well, although he anticipates that the market will not suffer in the long term.
Initially, you may think that this virus and the restrictions that it is causing are bound to have only a negative impact on the market. Especially when you consider how the stock market has been faring lately. However, while there are negatives that could come out of this situation, and there may be a bit of a “pause” for a while, we’re starting to see that this may have a positive effect on the market in some ways as well.
Does a drop in the stock market equal a drop in the housing market?
Before we dive into the changes regarding housing, it may be helpful to consider the economy first. You may have noticed the stock market has not been doing so great lately. Less than a week ago the Dow had its biggest drop since 1987’s Black Monday stock market crash.
However, even though the stock market is struggling, that does not mean that the housing market is going to experience that same decline.
Many people look at the 2008 financial crisis and simply see that both the housing markets and stock markets dropped together. However, that was only because the housing market was one of the primary catalysts for the crash of the stock market. The stock market itself does not have a huge influence over real estate.
One thing that you must keep in mind is that the housing market is very resilient.
The majority of home purchases are out of necessity. Having a home is a basic need, so regardless of what is happening with the stock market, people still need to buy homes. Couples are getting married and buying a home together, families are growing and need a larger house, etc.
Also, as the stock market becomes more volatile, investors often move to real estate investments as they are seen as less volatile.
This means that even during recessions, the home market remains relatively stable.
In fact, we even have data that shows that in a few of our previous recessions, the home prices have actually increased! Leading real estate data provider ATTOM Data Solutions analyzed home prices during all five recessions since 1980 and found that in three of them, home prices increased. Only 1990 and 2008 saw lower prices on homes, and in 1990 the drop was not very significant – it was less than 1%.
However, it’s also important to understand that every city has its own dynamics and may be influenced by this virus differently. Only time will tell how this pandemic and potential recession will affect the market in Park City and other areas in Utah.
Will the coronavirus cause lower mortgage rates?
As we mentioned above, as the stock market gets increasingly volatile, home investments become a safer option for many investors. This also leads to an increase in the bond market, and ultimately a change in mortgage rates as well.
We’re currently seeing some very low-interest rates, and many of the big lenders, including Fannie Mae and the Mortgage Bankers Association (MBA), forecast that those rates are likely to stay low.
This means that it could be a very good time to buy a home right now. It’s always best to take advantage of the lowest rates you can, and with rates like these, you may want to consider buying soon.
How will the coronavirus impact the Park City market?
Honestly, at this time, we do not know exactly how the coronavirus in Utah will affect the housing market in Park City. But we can get a small idea of what may happen based on the general predictions above.
There may be a bit of a slowing in terms of home sales over the next couple of months. This will likely be due to the fact that many buyers and sellers are practicing social distancing. We’ll likely see fewer open houses, and fewer people will be interested in having others walk through their homes.
However, this probably won’t affect the market very much, or for very long, as people still need to buy and sell homes. Plus, real estate agents can get very creative with virtual showings and video walk-throughs. Hand washing stations could also be set up for buyers if they tour a home in-person, and the home can always be cleaned before and after. There are certainly ways to make viewing a home safe for everyone involved.
And in regards to the housing market in Park City, it’s not likely to suffer much of a decline. Even if the stock market continues to struggle and we fall into a recession, the market will probably remain stable as it is much less volatile.
Plus, with low mortgage rates and less buyer competition, it may be a great time to purchase a home. Sellers are still in a good spot as well, so there’s no need to hold off on listing your home.
In the end, only time will tell how this pandemic will impact the real estate market as a whole and the market in Park City as well.
What do you think about all of this coronavirus news? How do you think it will impact us moving forward? Share your thoughts in the comments.
If you want to chat more about the market in Park City during these crazy times, call Scott or Natalie at 435-901-4309/801-244-2367.