The Invisible Toll Coronavirus Is Taking on the Housing Market
Coronavirus, or "COVID-19" has rapidly spread from China to countries around the world, including the United States. While the US death toll remains quite low, it's causing some major shifts in the country's economy. One of the largest areas where stagnation has begun is the housing market, but likely not for reasons you'd immediately suspect.
What Is the Main Driver?
Since the CDC and other organizations have reported that Coronavirus can be spread by people who are asymptomatic but have the virus, many have become more wary of being in crowded public places too long. Their homes are seen as a place of refuge where they don't need to worry about becoming infected with it. Most used houses do not have a "virtual tour" available online, which means that prospective buyers either have to trust pictures in listings, which likely won't happen, or they'll have to tour the house.
This is where the problem is. Buyers need to see the insides of houses, but as Redfin noted, sellers have become more and more reluctant to let strangers into their homes to take tours. As a matter of fact, sites like Redfin are seeing record numbers of houses being temporarily unlisted until the Coronavirus epidemic is controlled. While it's highly unlikely that a stranger touring a house would transmit Coronavirus to the owners, many don't want to take the chance.
The Demographic Selling Houses Is More Vulnerable
Of course, an implicit factor is that the demographic most likely to be selling used houses would be older people. It's well-known that younger people tend to survive Coronavirus, while older people are far more likely to die from it. Since Baby Boomers (those born between 1945 and 1965) own most private real estate, the housing market paranoia is likely driven by this.
Interest Rates Going Lower
A side effect of the dearth of housing buyers and sellers due to Coronavirus has prompted record low mortgage interest rates. Theoretically, this should mean that people who have been waiting to buy a house now have the perfect opportunity to get something affordable. However, with so many houses off the market and people afraid to travel and get exposed, it remains unlikely that many houses will be sold during the Coronavirus epidemic.
Popular real estate selling websites like Redfin and Zillow have taken a huge hit and are trying to mitigate the damage. They generally take the approach of encouraging people to just take basic hygienic precautions, like shaking hands. If sellers or buyers aren't comfortable with that, they're suggesting having a virtual tour of the house created. However, most would not buy a house without getting to see the interior for themselves, as virtual tours can easily be misleading.
What About the Future?
The future of the housing market is directly dependent on the ability of governments around the world to contain Coronavirus. If it can be successfully contained, a vaccine can be developed, and people can go on as usual, there is a strong chance that interest rates will go back up, houses will go back up on the market, and it will be a mere blip on the radar. If, however, Coronavirus becomes a global pandemic with no solution, interest rates are likely to plummet much further. The only way to know is to wait and find out, unfortunately.
While the house market may appear to be a buyers' market, it's become a selective buyers' market. Many houses are gone that were there a few weeks ago. It also varies regionally. In areas that have not been hit hard by the virus, like much of the Midwest, housing sales are progressing smoothly. With the news constantly blaring news about a death involving Coronavirus or complications, people naturally get scared.
Although it's unlikely that it will become a pandemic if it's contained soon, Coronavirus will likely always be remembered for causing interest rates to plummet down to record lows and be a temporary disruption to the housing market. Even if it does become a pandemic, people will still need houses, so trade will go on. The question isn't "if" the housing market will continue going strong, but rather "when" it will continue going strong.
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