Housing Market Showing Signs of Struggle
Covid-19 has been a global pandemic for around a month, though an issue as an infectious disease for over three months now. In all this time, one of the markets that stood the strongest was the housing market. To the surprise of virtually everyone, the housing market remaining strong was a good sign that society could pull through the pandemic without a crash. However, according to experts, a report that came out earlier today, April 2, suggests that the housing market is in dire straits.
The report was released from Realtor.com, one of the foremost authorities on the housing market in the United States, while also carrying information from other markets in Canada and elsewhere. According to the report, the first half of March was very strong for the market, while the last two weeks of the month started to show a decline in housing prices and, more importantly, interest in buying from potential buyers.
During the last week of March, new home listings dropped by over 13%, due to the lack of interest from buyers and the trepidation sellers had of moving out and going through that process while weâ€™re in the throes of a pandemic. Compared to the same time period from 2019, the pandemic is responsible for an overall 34% decline. This is a pretty big deal, as over a third of the business has disappeared in only a month.
Another aspect driving the downturn is the fact that home prices are also no longer rising. While it might seem like a bad thing to begin with, the type of thing that ushered in the 2008 collapse, the fact is that home prices need to rise necessarily to drive interest in selling, which is the yang required with the ying to make the market function. The fact that prices are falling, along with interest, is something that could hypothetically lead to a total crash, according to some experts who have interpreted the Realtor.com report.
What the Experts Predict
According to some experts who have studied the report, the issue here isnâ€™t necessarily anything to do with mortgage lenders, interest rates, or any aspects that contributed to 2008â€™s crash; rather, itâ€™s the fact that people themselves are opting out of buying and selling. According to one anonymous source, â€œWhen people on the street stop putting their homes up for sale, when [people] arenâ€™t even looking for homesâ€¦it creates a cycle that spreadsâ€¦like the [pandemic] and what you see is a huge downturn.â€ This downturn, of course, could grow and fester and spread and ultimately end up in a collapse.
This could certainly be compounded by mortgage lenders, banks, sureties and Wall Street joining in on the panic. It is quite possible, according to experts, that mortgage lenders could panic and throw new interest rates at people. In this were to happen, a total economic housing collapse would be all but guaranteed. This is also a big part of the reason why some politicians are fighting so hard to suspend such practices as late fees, spiking interest rates and evictions, until which point the economy bounces back from Covid-19.
How Panic Affects the Market
One of the biggest issues at play here is the overall media coverage, telling people that this is just the start of the pandemic, and that things are going to get worse. What this leads to, specifically for the housing market, is a market where buyers hold off on listing their homes for sell due to the anticipation of potential buyers not being there. In other words, this isnâ€™t even anything thatâ€™s realistically happening; itâ€™s just something that sellers fear.
The issue with this way of thinking among people who would otherwise sell their homes is that potential buyers can sense this. They see the lack of new homes coming up for sale, and they think to themselves that it must be a bad time to buy, or else new homes would be listed. This is the ebb and flow of the housing market, and if one aspect is struggling and failing, the other will follow along in concert, and the entire market ends up suffering.
For right now, the market is down only a little more than a third from last year. However, the trend isnâ€™t looking good at all. If it keeps up at this rate, it will be down over two thirds from last year by this time in May. This could be disastrous.
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