How Is The Coronavirus Impacting The Housing Market?
Few homes look their best in the dirty grays of late winter, which is, in part, why homebuying season coincides with the advent of spring. This year, however, alongside the less reassuring news of a virus circulating the globe, the crocuses that can make a house look that much better are turning up.
On March 11, the World Health Organization formally proclaimed the outbreak of COVID-19, the disease caused by the novel coronavirus, a pandemic. It's now claimed more than 44,000 lives in the United States. Shelter-in-place warnings for cities around the country have been released, and since the start of the pandemic, 26 million Americans have applied for unemployment.
If you're already in the market for a home, all the uncertainty may have you worried about the housing market. Is COVID-19 going to cause housing to crash, as it did in 2008 during the financial crisis?
For a highly competitive homebuying season, historically low inventory and rock-bottom mortgage rates will usually set the stage. The coronavirus makes life and markets anything but regular, while recessions typically have only a slight impact on the housing market.
During past pandemics, Zillow conducted a report on housing and found that although home sales fell significantly during an epidemic, home prices remained around the same or experienced a small decrease. This makes common sense, since when there are few transactions, it is more difficult for prices to adjust. In short, the housing market has simply been put on hold by recent pandemics.
Signs of this occurring in the United States have already been seen by the most recent housing market data. In the immediate aftermath of the pandemic, online traffic to real estate websites like Zillow and Redfin fell by almost 40 percent. New listings of homes for sale initially fell by as much as 70 percent in some markets like New York and East Bay, California. In early April, weekly mortgage applications fell 17.9 percent.
Depending on local conditions, the impact will be distinct in each city. A study from ATTOM Data Solutions concluded that the housing markets in the Northeast and Florida are the most vulnerable. In New York City, the housing market has come to a virtual standstill as stay-at-home orders approach their third month. But in Boston, with single-family home sales going steadily into the pandemic, the market has done relatively better. In-person home showings have been officially banned in Los Angeles, as much of the real estate sector is flocking to digital solutions to keep the market going.
In addition, a moratorium on foreclosures and targeted mortgage servicers has been introduced by the federal government to provide forbearance or reduced payments on any mortgage guaranteed by Freddie Mac, Fannie Mae, or the Federal Housing Administration (FHA).
As in 2008, these are effective steps designed to avoid a wave of foreclosures and keep the bottom from dropping out of the housing market, but they may have the unintended effect of bankrupting mortgage servicers that would now be on the hook for the mortgage payments that were missing. It is difficult to know what the harm to the mortgage industry and therefore to the housing market might be.