It’s no secret that the rapid spread of COVID-19 is raising serious concerns as 121 countries have reported over 124,000 case infections and the virus has claimed over 4500 lives globally. Big events such as Coachella Music Festival are being postponed, Americans are stockpiling groceries in preparation for the worst, and the stock market has dropped almost 10 percent since February 24.
If you’re considering your options to upsize or downsize this year, all this uncertainty might have you worried about the housing market. Will it suffer a decline similar to Wall Street? There are a few ways the virus could effect the housing market, but for now you can breath a sigh of relief, because a housing catastrophe on the scale of the 2008 financial crisis is most likely not going to happen. This is why…
Mortgage Rates Have Dropped
Mortgage rates plummeted to their lowest level in the history of Freddie Mac’s survey of mortgage lenders, which dates to 1971. According to the latest data released by the federally chartered mortgage investor, the 30-year fixed-rate average sank to a new low of 3.29% and is expected to go even lower.
Supply is at near record lows nationwide, and demand is near an all-time high. This combination means home prices are also near all-time highs in most cities as many potential buyers are bidding on a limited supply of homes for sale. If you consider the drop in overall consumer spending, the reduction in mortgage interest rates are expected to off set this and values are anticipated to remain stable.
Nearly a third of home building material inputs come from China, according to the National Association of Home Builders, not to mention more finished products like bathtubs, sinks, appliances, and more. If supply lines continue to be disrupted, it could dampen the pace of home building and contribute to more inventory shortages.
Investors are looking for the calm in the coronavirus storm, and U.S. residential real estate appears to be it, specifically single-family rental homes. These investors are not, however, coming to the U.S. to tour the homes themselves. They’re buying them online.
The wild card in the housing market is the coronavirus and because of this, there is so much uncertainty as to how bad it could get. As consumer spending declines, international investor interest grows, supplies chains become disrupted, inventory stays low and mortgage rates continue to drop, its impact will be prolonged and potentially induce a minor recession. This could put a damper on demand, which would actually be welcome for buyers in particularly competitive markets. Still, don’t expect home prices to drop, they would likely just slow down the pace at which they are currently rising.
Curious to know how COVID-19 could impact the value of your home? Fill out the form below to get connected.
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