Spring is always considered to be the hottest season of the year for both homebuyers and home sellers. This season is the busiest, especially April and May due to favorable weather conditions for showings. In 2020 March started as usual – with high sales indicators, but in the second half of the month, things have changed drastically. Coronavirus pandemic affected the economic conditions, and accordingly, it is expected to have an influence on the sales rates.
Let us analyze the recent housing statistics:
- If to compare with the same period in March 2019, the quantity of the newly-listed properties decreased by 34%.
- The price growth pace also showed notable slowing by increasing at 3.3% which is the lowest rate since 2013.
- If we analyze the Google searches during the recent period – spring 2020 – we would notice that the search results index including “homes for sale” decreased by -2.04% across the 50 largest metropolitan areas in the U.S.
However, the experts state that the U.S. housing market has shown a good start at the beginning of the spring – the purchase of housing and the construction of new homes continues at a regular pace.
Real estate companies get ready to coronavirus
Some real estate companies like Redfin and Zillow got prepared for the consequences of coronavirus. These firms buy houses from the home sellers and then resell these properties to gain profit. To prevent potential losses during the period of economic crisis, Zillow and Redfin temporarily suspended their home-buying activities. Another example is the brokers’ Re/Max and Redfin – they have opted for virtual tours instead of ordinary home showings.
The other indicator of the possible economic downturn resulting in lower home sales rates is the reduced volume of mortgage applications. This spring the total amount of mortgage applications fell by 24% as at the end of March 2020 compared to the previous year. It is important to note that the mortgage rates now are near the lowest historical levels. Accordingly, the number of applications for refinancing increased by 168%.
Coronavirus consequences vs Great Recession
Before the coronavirus outbreak, the state of the U.S. housing market was satisfactory. There was a tendency of the imbalance of the supply and demand – a great number of buyers but a lesser number of properties for sale. The lower mortgage rates contributed to the early start of the home-buying season and the faster sales.
The coronavirus pandemic raised concerns among the real estate market participants about the repeat of the recession in 2008-2009 and the foreclosure crisis. Economists claim that in 2020 the economic conditions are more favorable than in the times of the Great Recession.
In pre-Great Recession time, there was a shift toward the housing supply – it was greater than demand. In the year 2020, the limited supply will be the key factor that leads to the housing market recovery when the pandemic ends. It is vital to remember that the housing market traditionally fuels the process of recovery from the recession for the economy. The participants of the real estate market who were less affected by the economical conditions are willing to buy and sell which has a positive influence on the other economic industries.