It seems to be all anyone is talking about right now: “Coronavirus.” It’s wreaking havoc on the stock market, manufacturing, tourism, and business opportunities worldwide. But what impact could this epidemic have on the real estate market, if any? Could there be a silver lining? Can Coronavirus and real estate be a beneficial pairing?
Amid a major worldwide economic and health crisis, there is some good news for the real estate market amidst the panic.
Background on COVID-19, The Coronavirus
The so-called “Coronavirus,” officially known as COVID-19, is a respiratory illness caused by a specific strain of Coronavirus. Coronaviruses are not uncommon – it’s merely a term for a wide variety of viruses that can cause symptoms ranging from a mild stuffy nose to respiratory failure. Typically, these viruses originate in animals and then transition to humans. COVID-19 is one such Coronavirus.
We have faced other serious coronavirus outbreaks before. In 2003, the Sudden Acute Respiratory Syndrome (SARS) spread to more than 29 countries over a six-month period, infecting more than 8,000 people. And in 2012, the Coronavirus Middle East Respiratory Syndrome (MERS) tore through the Gulf Region countries. MERS did reach other regions of the world.
What’s different, though, is the transmission speed with COVID-19. The virus is spreading faster than other coronavirus outbreaks before it, and hosts are contagious long before they know they are sick. For that reason, this virus is causing more panic than previous epidemics.
Coronavirus Effects on the Stock Market and Global Investing
Since the first reports of the virus in December 2019, some 100,000 cases have been reported worldwide as of this writing. Some 3,000 people have died, including victims in the U.S.
As the virus spreads, countries across the globe attempt to contain it from causing more harm. Businesses across China closed following news of the outbreak in late January into February. Manufacturing halted. Schools shut their doors.
Because Chinese manufacturing came to a halt, economies worldwide – most of whom depend primarily on goods from China and other Asian nations – saw sharp drops in their inventory. As a result, investors panicked, and global stock markets saw significant downturns in the latter part of February 2020.
Markets in the United States suffered as well. The last week of February saw the steepest one-week drops since the financial crisis hit in 2008.
The Good News: Coronavirus and Real Estate in the U.S.
With all this panic surrounding public health, stock market values, and the global economic impact of COVID-19, it might be hard to see a silver lining. But the Coronavirus might have an unexpected positive effect: U.S. housing market interest rates.
As the economy slows due to dramatic global stock market losses, the Federal Reserve seeks to keep the U.S. economy from entering another recession. One way to prevent another economic downturn is to keep interest rates low.
As February 2020 came to a close, 30-year mortgage rates fell to an average 3.45%, their lowest level in more than three years. That, combined with increased consumer confidence, means potential buyers are still likely to purchase homes, even if their stocks aren’t performing well.
If there’s one bright spot in this dark cloud hanging over the world, it’s the American real estate market. Investors, buyers, and sellers can all benefit from the panic over Coronavirus. As long as global stocks continue to fall, mortgage rates should remain low – or even drop. That’s good news for anyone looking to buy real estate.
Coronavirus and Real Estate: What to Expect in 2020
While the U.S. housing market continues to see promising growth, global real estate markets – particularly Chinese real estate – are seeing a drastic decline. Worldwide investors will feel the sting of COVID-19’s effects.
But in the U.S., we are unlikely to see massive fluctuations in residential real estate. Existing home sales should continue to remain steady. However, new home manufacturing will likely feel the effects of COVID-19. Many manufacturers get materials from China. Since much of China is at a standstill due to the virus, those materials will be delayed getting to the U.S. As a result, new builds will likely see delays.
Overall, however, the real estate sector in the U.S. will not only remain stable, but could grow in the face of a looming pandemic. That’s because the Fed wants to prevent a significant economic downturn. As a result, consumers can enjoy lower interest rates, making home buying even more affordable.
Combined with a strong economy and low unemployment rates, even a worldwide health crisis can’t slow down the U.S. real estate boom.