Will the Coronavirus have an impact on the housing market, as the economy is grinding to a halt? The effect of COVID-19, the disease caused by the novel coronavirus, was declared to be a pandemic for the world
official by the World Health Organisation (WHO) in March 2020. As it already claimed 154,000 lives all over the world. Almost 10 million American’s have filed for unemployment across the country, since the outbreak of the COVID-19.
Will COVID-19 collapse the housing market, as occurred during the financial crisis in 2008 in America? If you are in the housing market already and expecting uncertainty in it, then get ready for it. The recession has a mild effect on the housing market.
According to the experts, a study on housing during the previous pandemic concluded that there will be a drop in home sales during the outbreak, and home prices will remain the same or may suffer a slight decrease. As
previous pandemics kept the housing market on pause. Web traffic of real estate portals like Zillow has dropped by 40%. And home sales have dropped by 70% in markets like New York and East Bay, California, mortgage applications dropped by 17.9% on weekly bases. The effect on housing prices will be different depending on local conditions in different cities.
Coronavirus has pushed the mortgage rate lower
The Federal Reserve has cut the interest rate since the coronavirus outbreak, bringing the Treasury Bonds to almost 0%. Accordingly, the stock market crash can affect the interest rate too.
In the present situation, the investors start thinking about the risk in the stock market and start selling their stocks and buying bonds. The increase in the demand for bonds pushes the price higher and lower the interest
payments-called the yield. The lower the bond yields the lower the mortgage interest rate.
Where the housing market currently stands
The housing market in Seattle has risen dramatically, as it has become one of the leading tech hubs of the country. But it isn’t much better in the other cities, as the supply is near low nationwide and demand is near high. This combination refers to near high home prices in most cities and limited home sales for most potential buyers.
The number of houses for sale was dropped even lower at the end of 2019 when compared to a year ago percent. During the 2008 financial crisis, both the housing markets and stock markets dropped down. But people don’t buy a house as an investment. Buying a house is a basic need, and the reason to buy is usually when someone is entering into a new stage of life.
A recession doesn’t change the circumstance for people to buy a house. The housing market can be incredibly durable even in the recession.
Are Home Builder supply lines being disturbed
Yes, a short answer. According to the National Association of Home Builders more finished products like bathtubs, sinks, appliances, and more materials are input from China, and these supply lines have been disturbed. This could delay the home construction after it is finalized.
“Lower interest rates support demand and consumer confidence readings in the coming months will be key, but the virus does heighten some of the longer-term challenges on the supply sides in terms of housing supply” -Robert Dietz.
