COVID-19 Housing Market Check-In And Projections
Lauren Nowacki7-Minute Read
May 15, 2020
In what should be the busiest time of year in real estate, sellers are pulling their homes off the market, buyers are pausing their home searches and agents are finding new ways to meet with clients online and provide virtual showings of homes that can’t allow visitors. To say COVID-19 has had a bit of an impact on the housing market would be an understatement.
While you can still buy or sell a house during the COVID-19 situation, much has changed. What’s going on in the market right now, and what can we predict as we move into peak home buying season? Let’s take a look.
What’s New With The Housing Market
The last time we provided you with an update on the housing market, we were just beginning to see the effects of COVID-19 on housing as well as the larger economy. Many states were well into their stay-at-home orders and all signs seemed to point to this year’s peak buying season seeing a significant decline in traffic compared to previous years.
Now, as states begin to loosen restrictions or prepare to fully reopen, real estate agents will be able to resume in-person showings in some areas. But does that mean the housing market is on the road to recovery from the hits it took due to the COVID-19 lockdowns?
We aren’t in the clear just yet, and many will be watching and waiting to see if a second wave of the virus surges as states open back up.
The unemployment rate is a big factor in how the housing market will fair in the coming months, and the April jobs report, released in early May, did not bring good news on that front, with a record 14.7% unemployment rate. This is a rate that hasn’t been seen since the Great Depression, and is a significant jump from 4.4% in March. For reference, the unemployment rate in February was 3.5%, a rate it initially hit in November 2019 and a 50-year low for unemployment.
It’s possible that at least some of these workers will be able to return to their jobs fairly quickly once businesses open back up, but how soon that will happen and how many will be able to do so largely depends on the course the virus takes, whether a new round of stay-at-home orders is necessary and how well the economy can recover from this downturn.
Mortgage rates remain near record lows, which means that those who are in a position to purchase or refinance have a great incentive to do so. However, buyers with less-than-stellar credit may find it more difficult to be approved for a loan, as some lenders have begun tightening credit requirements for the loans they’ll approve.
What Housing Market Data Is Telling Us
In its Weekly Housing Market Monitor and Flash Economic Pulse Survey for the week of May 4, the National Association of REALTORS® reported that seller confidence is up as many prepare to list their home, with 77% of members reporting in the Economic Pulse Survey that they’re working with sellers who are preparing to sell once stay-at-home orders have been lifted.
These sellers are making good use of their time at home, too; 50% of those NAR members said that the sellers they’re working with are focusing on DIY home projects to prepare their homes for market.
Home sales prices are holding steady as well, with median prices up nearly 8% year-over-year.
However, there are still some clouds on the horizon. The flash survey data tells us that many buyers have put their searches on pause, while others have stopped looking entirely due to job loss or concerns about job stability.
Additionally, 73% of respondents reported a decline in buyer interest in the week before the May 3 – 4 survey, with 30% reporting that buyer interest has been cut in half.
On the seller side, 51% of respondents reported that sellers were delaying selling their home a couple months. Of those who are braving the COVID-19 market, the majority – 73% – haven’t had to lower prices to attract buyers.
Inventory is still down, with a 15.3% decline from what the national inventory was at this time last year, according to the April Monthly Housing Market Trends Report from Realtor.com®.
Overall, consumers appear to have substantially less confidence in the housing market than what they had pre-COVID, as is reflected in Fannie Mae’s most recent National Housing Survey.
The National Housing Survey uses a measure called the Home Purchase Sentiment Index to gauge consumers’ current outlook on housing market conditions. In April, the HPSI fell to 63.0, the lowest it’s been since November 2011. For reference, HPSI hit an all-time high in July 2019 at 93.7 and had held fairly steady until March of this year.
The survey also found that only 29% of Americans believe now is a good time to sell a home, while 48% say it’s a good time to buy.
What can we gather from this data? Some consumers seem to be tentatively preparing for the end of the COVID-19 shutdowns and the subsequent economic downturn. Sellers are prepped to sell once stay-at-home orders are lifted, and many buyers are simply on pause, rather than completely abandoning their home search.
However, interest in the market is down. Many would-be buyers are dealing with a loss of income or shaky job security, and even those who have a steady source of income might have a harder time getting a mortgage as some lenders implement stricter credit requirements for applicants.
We’re dealing with a ton of uncertainty, and for now we’ll have to watch the states that are reopening for signs of a new viral wave and see if economic recovery is right around the corner or if we’ll have to hunker down for a little while longer.
What Real Estate Professionals Are Seeing
To get an agent’s perspective on this situation, we talked to Rocket Homes Real Estate LLC Partner Agent Megan Blum, a real estate agent at Flux Real Estate in Seattle, Washington.
Blum said she’s seen an equal decrease in the number of listings and buyers, meaning that the market hasn’t completely lost its competitive edge.
“Homes in the hot neighborhoods are not staying on the market for any longer than a week,” Blum said. “Even the condo market is moving quick and consistent.”
However, she doesn’t believe this will last, predicting that the number of listings may increase while buyers remain hesitant in an uncertain economic environment.
“If things normalize this summer, I see the real estate market balancing out again in supply and demand by February of next year,” she said. “But none of us have a crystal ball, unfortunately.”
When asked about her predictions for the long-term effects of the COVID-19 situation on the home buying/selling process, Blum said it could affect home viewings and buyer preferences.
“I think open houses could be affected as people have been relying on virtual tours and have probably appreciated having the privacy of having to see homes with an agent on their own time,” she said.
She also predicted that buyers may become more interested in new construction homes that have the benefit of having had no previous owners and that more buyers may be looking to move out of cities as more companies allow remote working.
What Does This Mean For Me?
Whether you’re able to participate in the housing market right now depends a lot on individual factors, not least of which is your own needs. Whether you’re at the stage in your life where you’re ready to buy your first home, are selling to move for a new job or something else, those who need to buy or sell can still do so in most cases, even if some of the process has been moved into the virtual realm.
However, for those who are facing economic uncertainty or don’t have a pressing need, now might be a better time to take a wait-and-see approach. Though many experts have weighed in on the course this pandemic and its subsequent economic fallout will take, nobody knows for certain. For many of us, the best we can do is stay informed and prepare for the eventual recovery.
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