10 Ways COVID-19 Affected the Real Estate Market
COVID-19 has affected the real estate market in various ways, some good and some bad. President Biden has introduced a tax plan that can lower taxes for many Americans and give DACA recipients the opportunity for federally insured mortgages. The 2021 stimulus checks will be rolling out pretty soon and it will give families the opportunity to have more money for a down payment.
1. Economic Slowdown
The economy is slowing down, some businesses are closing while others are booming. Covid-19 is affecting everything and everyone in one way or another. A study by the Local Records Office in Bellflower, CA shows how businesses have had to close down, schools have to restructure how they will operate, and the housing market has taken a big dip.
There was a 25% drop in sales this past month. It is hard to sell houses when you can’t have people come in to look at them.
2. Property Prices Are Plunging
Property prices are plunging but sales are booming? This time of year, we’re used to seeing “Open House” signs in the neighborhood but the shelter-in-place orders prevent people from gathering in groups, and travel is prohibited in many states.
How are property sales booming in a pandemic? This puts a big damper on home sales and people are afraid to move not knowing what will happen in the coming months so even rentals are almost nowhere to be seen.
3. Shelter-in-place Regulations Limit Movement
The reasons for these limitations are that the coronavirus can linger in the air in droplet form for hours and infect people breathing the air in that space. Restaurants, churches, gyms, classrooms, and any other places where people are in close proximity with little ventilation are hotbeds for germs. Businesses that have been able to remain open have had to change to online sales only with no contact delivery.
4. Buyers Are More Hesitant
Buyers are more hesitant and they have every right to do so. With all this uncertainty it’s easy to see why some buyers may be hesitant to take the plunge. Although sales are dropping, people are still interested in buying, they‘re just doing it at a slower rate than before Covid-19. An article published in Forbes spotlights some ways that Covid-19 is affecting home buyers.
If you’re in the market for a house, all this uncertainty might have you worried about whether or not the housing market will be stable. Will COVID-19 cause a collapse of the housing market, as it did in 2008 as a result of the financial crisis?
Is history repeating itself? Throughout history, when a crisis like this happens prices in the housing market drop as well during the crisis but rise again soon afterward. Many think that once the pandemic has been contained and things return to normal that the real estate market will again return full swing.
5. Buyers Not Able to Look at Houses Affects Sales
Study shows that twenty-eight percent of home buyers are still looking. Some said the reason they paused their housing search was the uncertainty of their employment status and not being able to look at the listings in person. Will homebuyers find a way?
Many are waiting to see what will happen in the next few months with the pandemic. So buyers not being able to walk through homes is affecting home sales. Unfortunately, it’s a lot harder to sell houses online when buyers want to see the inside of a house before making an offer. Interested buyers are being more cautious and taking their time to see what will happen with the economy.
6. Interest Rates Are Dropping
While the numbers are dropping, interest rates for new home sales are dropping as well. According to Chief Economist for Lendingtree, Tendayi Kapfidze, the rates on 30-year mortgages is lower now than it has ever been. He expects to see more applications for home loans in the coming months, as he predicts that the interest rate will drop to 2.7%.
7. How the Virus is Affecting Real Estate Owners
If you have a rental property you may be affected by tenants who are having a hard time paying rent due to being laid off or unemployed during the pandemic. While the focus is on retaining good renters despite the crisis, those considering investing in real estate may see this as a drawback to moving forward at this time.
8. Buyers Are Looking For New Features
A larger amount of buyers are looking for different features than in past years. It used to be that a potential buyer would be looking for houses with a pool, sauna, garden tub, or one that is close to a golf course, but since the virus, more people want extra bedrooms that can be converted into a home office or larger backyard space after being cooped up inside their small apartments for a longer time.
9. Opportunities for Investors
Prices dropping and interest falling to record lows, there are opportunities for real estate investors to snap up deals while they are available. It is also a good time to refinance your current mortgage for a lower rate if you qualify. Many current real estate owners are looking to refinance their homes in lieu of buying a new property.
A tip for investors is to look for opportunities in the real estate market that occur infrequently and invest in properties with a guaranteed return. One investor says he is putting his money in buying and renovating properties to become income-producing rentals. Which is good news for tenants and those looking for places to rent. He says he has a dozen or so properties that he plans on turning into rentals in North Carolina and other places of the South.
10. Opportunities for Tenants to Get Help
Unemployment has been rising due to the coronavirus outbreak, real estate owners with rental properties may be concerned about getting their rent payments. With the passing of the CARES Act, as of March 27, 2020 eviction proceedings are frozen for 120 days for renters covered by Section 8 or landlords with loans from Fannie Mae, Freddie Mac, and FHA loans.
For those not living in houses with a government subsidy, check with your state as they may have similar programs suspending evictions for awhile.
Due to the record lows, we’re seeing right now, long-time investors will probably find some great deals on distressed property putting money back into the economy for builders to perform more renovations and building new homes.
Since new home buyers are scarce these days there is no one needing building materials or contracting work is done. If this pandemic follows the path of the previous financial crisis, once the virus is under control everything else will stabilize including the real estate market. Many believe that President Biden will help clean up Trump’s economic mess.