If you’re a real estate professional, you’re probably a little uneasy as you watch shutdowns continue to impact the local economy. However, across the nation, residential real estate is booming as city dwellers continue somewhat of a mass exodus to the suburbs. So far, real estate market trends aren’t taking a dive, despite early concerns to the contrary.
Still, with unemployment above 11% in July and a future financial bailout package not yet decided, many Americans are now at risk of missing mortgage payments and losing their homes. As the real estate market shifts again amid the Coronavirus pandemic, what do real estate experts predict for the latter half of 2020?
House Sales Are Still Booming
While some experts warned of a coming housing crisis early on in the pandemic, that fear has largely been unwarranted as the summer season began.
It might seem unlikely with so many businesses shuttering their doors and more than 1/10 Americans out of work, but residential real estate seems to be booming.
While the housing market saw an initial slump in the early days of COVID-19, June saw a massive jump – a more than 20% increase in existing home sales compared to May. And while sales are still down overall (the same report found a 10% drop from June 2019), the market seems to be remaining steady.
Meanwhile, home prices continue to rise, with the median sale price up 3.5% from last year.
Why do home sales remain largely unimpacted by Coronavirus? Experts say there are several factors at play.
The Exodus to the Suburbs
First, the pandemic led many Americans to move away from cities and into more suburban and rural areas. As workplaces shut down, and people started working from home, the 24/7 quarantine inside small apartment buildings no longer felt trendy. Condos that were “downtown, within walking distance to restaurants” lost their appeal when everything closed.
Therefore, some city dwellers decided it was high time to move away from metropolitan living and into homes with more space – both indoors and out. It’s not exactly an exodus – numbers of suburban homebuyers are up only slightly over previous years – but it’s enough to raise demand.
Historically Low Interest Rates
Secondly, as unemployment rates rose during March and April, economists began to worry about another recession. To prevent a devastating crash, the Federal Reserve lowered interest rates. Consequently, many lenders lowered mortgage rates in turn. Now, well-qualified buyers can find some of the best interest rates in years.
Pair these low-interest loans with a desire for more room and new surroundings, and you have a recipe for a buying boom. After slowdowns in the Spring, new build construction exploded in June, showing a 17.3% increase over the previous month. And while these rates are still slightly lower than the same time last year, they’re an indicator that the housing market is maintaining its footing amid the Coronavirus pandemic.
Working from Home and the Need for More Space
Finally, home sales are booming because Americans need more space.
We’ve all been confined to our homes for months. More employees than ever are working from home offices (or dining room tables, patios, or bedrooms). Our kids are doing school work, just feet from our work computers. Our spouses are trying to conduct Zoom meetings while we are watching the evening news.
The bottom line: we are feeling more cramped than ever. And while we may not have needed much living space before COVID, the walls are metaphorically closing in on us.
As many businesses intend to keep employees home for the foreseeable future, those employees are making long-term plans that include a larger home with space for a private office.
What’s the Outlook for the Real Estate Market Trends Amid Coronavirus Fears?
With all this encouraging news about the real estate market amid Coronavirus, it might be tempting to breathe a sigh of relief.
Not just yet.
While no one knows for sure what the future holds – and while there are certainly reasons for optimism – the long-term economic impacts of COVID-19 may just be getting started.
In July, many government protections for workers and businesses elapsed, with no replacements in place as of this writing. Without eviction or foreclosure moratoriums, some 30 to 40 million Americans could lose the roof over their heads. Those evictions could set off a domino effect that would impact the entire real estate market in ways not seen since the Great Depression.
If the market sees a spike in foreclosures, we could see a massive drop in home values and sales.
However, some economists say that even if we see decreased home values, it won’t be as drastic as the 2008 housing crisis.
What We Know About the Housing Market
There is much uncertainty about the future of real estate market trends amid Coronavirus. We just don’t know enough about the long-term impacts. But with historically low interest rates and increased demand, many are encouraged about the future.
For real estate professionals, that’s likely to mean a steady stream of buyers in the coming months.