Are you tired yet of being part of a major historical event? No doubt, COVID-19 has turned the world on its head. These kinds of crises inevitably send shockwaves through the economy, potentially leading to downturns. Thus, it’s worth considering what kind of impact the pandemic will have on the real estate market. But is it too early to tell?
Disruption of Spring House Hunting
In March 2020, during the onset of the pandemic, people that had listed their homes before the crisis struck began taking their properties off the market. This behavior was a preventive measure to stifle COVID-19’s spread. Also, those on the market for a new home were adhering to social distancing protocols. Many potential buyers began canceling with their real estate agent, putting their house-buying journey on hold. Supply was constrained.
Are Property Prices Falling as a Result of the Pandemic?
Realistically, the wounds caused by the pandemic and related shutdowns are too fresh to genuinely determine the long-term impact on home prices. Regardless, April 2020’s median home sale prices increased by 4.7% compared with where they were the 12 months prior. Then, in May this year, prices edged up 0.5% year over year.
Now in October 2020, the median home sale price has surged by a record 15% year over year to $320,625, according to a report from real estate broker Redfin. More than a third of that increase has occurred since early July.
A temporary shock
Initially, the pandemic stopped the resurgent housing market in its tracks.
Sure, containment measures in certain areas of the country have loosened. However, at the time of writing, infection numbers are increasing and it appears that rigorous lockdowns may once again be mandated. Realistically, until the authorities have a firmer handle over the pandemic, the housing market will find itself in flux (like the rest of the world).
This most recent shock won’t persist forever, and improvements are anticipated in 2021 because of an anticipated recovery in employment rates and revitalized immigration.
Unfortunately, until then, we’re still facing the fallout stemming from mass job loss. The real estate market’s recovery will happen in intervals, as people regain their confidence and gain their footing in the “new normal.”
Slow Recovery Will Increase Affordability
Prices held up in the face of shutdown-based adversity while home resales plummeted 80%. But how did this happen?
Supply decreased in lockstep with demand, which was advantageous for those trying to turn a sizeable profit on their real estate.
The outlook for sellers isn’t rosy right now, however, according to many experts. The expected financial fallout resulting from high unemployment will scare potential buyers from moving forward with their plans to purchase. These fears will be most prevalent among first-time homebuyers.
Also, homeowners who notice their income tightening will start to consider selling their property for less than they wanted. Over time, this will translate into lower interest rates and reduced home-buying costs more conducive to a buyer’s market. That’s not to say prospective homeowners will be laughing all the way to the bank; the momentum is predicted to be muted.
It’s expected that this limited scope for affordability will only occur toward the tail-end of the year due to the slow economic recovery.
Should I Wait To Purchase/Sell My Property?
If you’re intent on selling, now is the time to move forward in the US, with the median price coming off an all-time high (as mentioned above). It’s hard to know if or when the bottom will drop, and you lose the opportunity to generate the return you deserve.
Conversely, buyers should wait until December to assess the pandemic’s true nature. Provided you’re gainfully employed and possess the savings, the end of the year or the beginning of next year might be the right time to start house-hunting.
The housing market is undoubtedly impacted by the global health crisis. Yet, only time will tell how drastically the landscape will be altered.