Experts See A Real Estate ‘Frenzy’ Once COVID-19 Regulations Lift
Prior to the outbreak of the novel coronavirus, the U.S. housing market showed signs of a red-hot spring season. Historically low mortgage rates and high demand birthed a healthy, thriving seller’s market at the beginning of 2020.
This pre-pandemic market strength gives many experts hope that the housing crisis due to coronavirus effects are just temporary.
“The U.S. housing market was a strong seller’s market before the COVID-19 pandemic outbreak, and it is expected to remain a seller’s market,” says Daniela Andreevska, an economist at Mashvisor.
Andreevska expects home prices to drop only marginally during the pandemic, but, she says, “the comeback is expected to be quick.”
Trish McMillen is a Keller Williams agent in Park City, Utah. She says she still has plenty of buyers who are still house hunting.
“Just last week, I had one couple who had looked at 12 homes, six of which went under contract in under seven days,” McMillen says. “That’s still incredibly fast, no matter how you look at it.”
Back in April, McMillen predicted that any market dip from the coronavirus would only delay spring purchasing, setting the stage for a real estate “frenzy” by July. She says quarantine stir-craziness may show growing families just how tight their starter home really is. Or, packed public places may inspire city dwellers to seek the space and solitude of the country.
McMillen was right. With home tour restrictions lifted, post-covid housing is resurging. Shoppers feel more comfortable visiting properties, according to a survey from the National Association of Realtors. About two-thirds of people who attended an open house in the last year said they would now “without hesitation.”
New home sales in July 2020 were 13.9 percent higher than in June, and 36.3 percent higher than 2019.
That’s partly because of recent job gains and positive loan profiles of buyers, according to HousingWire.
The historic resiliency of the U.S. housing market
Many experts say that even as anxiety over a housing crisis due to coronavirus mount, homebuyers and homeowners can take comfort in the historical durability of the housing market.
“The only exception to this rule occurred during the most recent Great Recession starting in 2008,” Liu says. “This was because the recession was triggered by real estate itself due to rampant speculation and the lack of lending due diligence.”
A report by researchers at First American Financial Services supports that idea. Using data from Freddie Mac and the National Association of Realtors, the report found that with the exception of 2008, home values continued to increase during recessionary periods.
“While the housing crisis is still fresh on the minds of many, and was the catalyst of the Great Recession, the U.S. housing market has weathered all other recessions since 1980,” Deputy Chief Economist Odeta Kushi writes in the report.
“In fact,” she continues, “the housing market may actually aid the economy in recovering from the next recession – a role it has traditionally played in previous economic recoveries.”
Housing will always be “essential”
What separates the stability of the housing market from the volatility of other economic indicators, like the stock market?
Liu thinks it comes down to need.
“People will always need a place to live,” Liu says.
Garrett Derderian, the managing director at CORE in New York City, says, “Life events drive the real estate market.”
He predicts that after pandemic regulations lift, “There will certainly be hesitant buyers as we emerge from the crisis, but there will also be those patiently waiting to enter the market and take advantage of low mortgage rates.”
He says although stay-at-home orders might make it feel like we’re at an economic pause, “life itself is not paused.”
Derderian says big life events, like growing families and new job opportunities, won’t push pause — not even for a pandemic.
This post was originally published on April 23, and has been updated.