Few things have caused such a massive shock to all aspects of the economy as the pandemic known as COVID-19. Every contributor to every nation’s GDP, from the stock market to the Fortune 500 to the real estate market has felt the effects of the novel Coronavirus as the disease continues to wreak havoc on the world.
This entire situation makes one ask the question of what the short term and long term effects on the market will look like. The truth of the matter is, that the ramifications are significant, particularly in the real estate market.
In this article, we’ll break down how COVID-19 is impacting real estate right now and what trends you can expect to see materialize.
Lower Volume
The principal effect on the real estate market can be summed up in two words: lower volume.
As the death toll in the United States continues to rise, sellers are taking listings off the market and buyers are beginning to take a second look at whether purchasing a house in this troubled time is really necessary.
The causation for this effect is logical. Sellers don’t want to deal with the necessary interaction that comes with holding open houses and closing on a home, in fear that they will come in contact with the virus.
On the opposite side of the market, buyers are also closing their checkbooks as employment is no longer a certainty. With a significant portion of the economy’s companies furloughing or laying off workers, going into massive debt and taking on a mortgage to buy a house isn’t as attractive of a proposition as it may have been just a few short weeks ago.
Plummeting Mortgage Rates
On the flip side, however, the COVID-19 pandemic has had one effect: mortgage rates have plummeted down to 3.29%. This is an all-time low in the industry. The government is trying to stir up the industry and not allow the economy to continue crumbling in the wake of this virus’s effects.
The effects of decreased mortgage rates will be increased buyers. However, this hasn’t materialized yet and may even be awaiting a decision where the Fed cuts rates once again.
One effect to keep in mind of decreased mortgage rates is that if buyers do eventually end up flooding the market, one can expect real estate to very quickly turn into a seller’s market all around the nation. Buyers need to be wary of this if they have been planning to purchase a home in the near future.
How is the Real Estate Market Dealing with COVID-19?
In short, no one really knows yet. We know that the short-term effects are decreased mortgage rates in an effort to spike volume back up to normal levels. As the curve begins to flatten, we can expect buyers to take advantage of mortgage rate cuts as the world’s economy, and the real estate market, gets back on track. However, at this point, nothing is certain.
For more real estate advice, be sure to check out the rest of the articles on the blog!
Resource:
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