How will long-term safety concerns related to coronavirus affect the housing market? Here are some indicators.
As states see an uptick in COVID-19 cases, people revert to a cautious state. After prolonged shutdowns caused substantial economic harm, many states opened their economies several months into the pandemic. The result was an increase in cases in 41 of 50 U.S. states. This caused a resurrection of widespread fear and worry about what aspects of life could return to normal.
Schools opted for virtual openings instead of in-person instruction. Grocery stores and large chains required mask use for all customers. Most businesses began rolling back aspects of their reopening. With coronavirus concerns clearly not going anywhere anytime soon, what will be the impact on the housing market?
The housing market got lucky in the grand scheme of things. After an initial freeze in the spring, things seemed to rebound faster than predicted. The pent-up demand to buy a home that didn’t happen in April or May sprouted back in June. Growth occurred as the summer progressed. This may have resulted from buyers being kept waiting so long. Sellers were mentally preparing to put their homes back on the market during the pandemic.
Thankfully, the real estate market’s quick shift to digital helped spur a recovery. With virtual walkthroughs and 360 video home tours, buyers can see a home for sale without setting foot in the door. Hesitant sellers feel safe and in more control of who’s going in and out of their home as well. Limiting access to agents alone slows risk. Everyone feels safer and the home buying process continues.
This won’t work in every case. But, the triumph is in how fast these options became available. Using them when possible made a significant contribution to the quick recovery of the housing market.
Related: Selling a House During Coronavirus
Forces tipping the scale backward
July served as a big turning point for the home-buying boom as a few significant changes came into play. Even with virtual options making home buying a less risky process, there’s more at work here than safety.
When the pandemic hit, the federal government worked to keep people in their homes with a huge stimulus. The $600 per week in extra unemployment benefits helped people pay their bills and buy essentials. It’s still up in the air whether an extension to this benefit is in the works, or if it’s coming to an end. Lack of support can lead to more foreclosures or individuals needing to rush to sell their home.
While foreclosures increase the inventory on the market for buyers, there’s a ripple effect if there are too many. The overall value of neighboring homes can go down, making it harder to sell for a reasonable price. The impact could affect the market for months to come, forcing many to lose their home while others are unable to leave.
Demand may still increase, but not necessarily for homes to buy. “The first-time homebuyer market, which was just starting to build a lot of momentum, will probably be set back to some extent, particularly in regions that have been hit the hardest by layoffs,” according to Forbes. With a decrease in income, people look to rent rather than buy a home. Those experiencing a foreclosure will look to rent rather than buy another home. This impacts the market from a seller’s perspective forcing them to either stay in the property, or maintain it as a rental.
Among the financial issues bearing down on people, the issue of safety still presents a major challenge to the real estate market. As COVID-19 cases go up, so does concern for people’s health and well being. We go out less. We interact less. We’re afraid. There is still so much we simply don’t know that can boost anxiety. This can translate into a distrust in putting one’s home up for sale. It can also dissuade some from shopping for a new home. Whether these feelings will make a significant impact on the real estate market going forward still remains unknown. Continuing to take steps to make the process feel as safe as possible for both sides is essential.
It’s still a seller’s market
What happened in March could repeat itself later, although it’s not likely. The rebound was so efficient that there’s less risk for such a low dip happening again. Still, as safety once again becomes an issue with rising cases of coronavirus, sellers could get nervous. Putting their home on the market increases their risk of an asymptotic person entering their home as a potential buyer. While every precaution is typically taken to prevent the spread of the virus, it’s the fear alone that can put sellers on pause. This would again leave buyers with a reduced inventory, rewarding those brave enough to sell with the potential for a bidding war and multiple offers on their home.
On the other hand, with a second wave, buyers could feel that it’s safer to wait. This would force homes to sit on the market for much longer than sellers expect. Right now, it’s unknown how it will all play out for the real estate market.
See also: 4 Post-Pandemic Housing Trends
Remove the risk and make a quick sale
One way to prevent these risk factors from interfering with your plans to sell your home is to work with an off-market buyer. Not only is the sale process quick, allowing you to get ahead of a foreclosure or a change in income, it’s also much safer. One person, a Market Expert, comes to your home and does a thorough evaluation before making an offer. Everything is “as-is,” and there’s no need to make any repairs. No need to spend time and money creating a virtual tour of your home or preparing it for sale. This quick and seamless process can help get you as close to market value for your home as possible in a faster timeframe. If you’d like to learn more about how an off-market buyer can help you, contact Sundae today.
Polina is Sundae’s Sr. Director of Research and Lead Economist. She has more than 15 years of valuation experience across commercial and residential real estate. Her background includes stints with Cushman & Wakefield, Hanley Wood, and Standard & Poor’s. Polina graduated with a double major in Economics and International Relations from the University of California at Davis and has been a CAIA Charter Holder since 2010.