Is the Coronavirus Crashing the American Housing Market? Yes, but No.
It's no secret that COVID-19 is wreaking havoc on the economy. Any economist can tell you that we're in unprecedented times. The closest time in history to this was approximately 100 years ago with the so-called "Spanish Flu", though we seem to be adapting much faster than we did to that pandemic. It is likely partially due to technology and partially due to governments around the world taking action to clamp down on civilian activities outdoors and in close contact until the pandemic is resolved.
A question popping up more and more is whether the housing market is crashing or will crash due to Coronavirus. The short answer is "yes and no", but the longer answer is far more complex. Here's what you need to know about the housing market during this odd and unpredictable time.
Do Not Panic Sell or Buy
The term "panic-selling" originated in 1929, when many "panic sold" their remaining stocks, leading to the infamous "Black Friday" and subsequent "Great Depression" that took the country years to shake off. Unfortunately, there is a similar phenomenon occurring with those who heavily invested their 401(k) plans and 403(b) plans in stocks.
With housing, there is absolutely no need to panic-sell your home. You will be able to get much higher values for it once restrictions are lifted, and you're free to have in-person, full-contact meetings with prospective buyers. Panic-buying houses is also a trend that's recently emerged, for better or worse. This means that some people are taking advantage of the pandemic, looking for houses to buy. This is especially true in "locked down" states, where citizens' movement is severely restricted, and some are eager to leave.
Unless you've always wanted a mansion in a golf community in Florida, and you're positive that you'll be able to handle the fiscal ramifications of purchasing such a house, it's strongly suggested that you hold off on that next home purchase. With so many scams going around, COVID-19 not fully contained, and other factors to consider, it's simply not worth it.
The Reality of a Market Crash
Any real estate agent could tell you that late Summer is the worst season for real estate. It's the quietest time of year most of the time. The busiest time of most years is right now, but that clearly is not the case at the moment. The housing market is directly tied to the job market.
With tens of millions of Americans requiring COVID-19-related assistance, there are very few in-person jobs remaining. Some Americans can work online, though many are seeing hours cuts and other undesirable side effects of this temporary economy. In addition, many mid-level management staff are being cut out as companies are trying to implement fully online solutions for their work forces.
In short, there will be a temporary housing crash. Don't buy into the alarmist headlines of "Sell Now! Your House Will Soon Be Worthless!", since these are simply fear-mongering and not technically true. Your house may be considered "worthless" for about a year, according to seasoned real estate agents. The only impact this will have is that your property tax should shoot far down from what it usually is, another reason to simply "hold" if at all possible.
What Happens Next?
After we experience an inevitable housing market crash, many wonder what will happen next. Again, this is completely uncharted territory. Once the crash ends, home values will surge right back up, but the market will change.
Unfortunately, the "bear" market that allowed the commuting economy to come about will likely be destroyed. This means that, around denser markets, those so-called "McMansions" that are 30 to 60 miles away from employment centers will likely not retain their former values. Americans are clearly shifting away from this model in favor of less space and being closer to their workplaces. Another major shift is that many Americans now favor telecommuting instead, making these higher-priced houses irrelevant.
The sad reality is that many very cheap areas have more amenities. Many "bedroom communities" only rely on location and relative proximity to urban centers for tax money.
Going forward, we can expect to see a lot of flux, and experts will be paying close attention. We can learn a huge amount about the housing market from this pandemic, and once everything has settled, we will be able to make more accurate predictions.
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