Whether you're looking to buy or sell a home, you're likely to be watching the housing market with renewed interest as we navigate the COVID-19 pandemic crisis. Ideally, we'd have a clear picture of what the real estate market looks like and what trends to expect in the future. The truth is much is unknown — both about the disease itself and how its impact will weigh on economies and industries such as the world of real estate.
As leaders in the real estate market, we have a deeper understanding of market changes and the many factors that feed into the state of the housing market and home trends overall. Here are some of the trends that may come into fruition in the wake of the novel coronavirus.
Several factors can impact our nation's and our region's housing trends. Among them are the decisions local governments make about how to manage virus spread — or whether a national directive is put into place to manage future outbreaks. A 120-day moratorium on evictions for federally-subsidized housing as well as properties with a federally-backed mortgage loan also plays a role. Also, some of the biggest mortgage lenders in the U.S. have opted to suspend mortgage payments. At the state level, as regional governments issue shelter-in-place regulations, some regions are also suspending non-essential construction.
With so many unknowns, housing trends are mired in uncertainty. We don't know how the fight against the virus will play out, how long it will take or the lasting impact on jobs and supplies such as those for new construction or remodeling.
When the American economy returns, here are some possible trends that could emerge post-pandemic.
· Expect a cooling-off period. Buyers have hit pause, with the National Association of Realtors indicating that 11% of agents surveyed recently reported a drop in buyer traffic. Many have become reticent to shop for houses in the wake of job or income losses, possible layoffs or a volatile stock market. Sellers have also backed off, with 7% of Realtors reporting a drop in seller traffic. There are myriad reasons behind the slide, some related to the risk of virus spread, in particular for those with vulnerable family members. Additional lockdowns could further affect traffic on both sides, and the long-term economic impact of the pandemic will no doubt play a role.
· As we entered the pandemic with low inventory in most housing markets, a suspension of construction or a pivot by developers could further exacerbate the situation. Both residential and commercial construction have been affected, which could have implications not only for house hunters but for those seeking multifamily housing or investment properties as well.
· As companies like Twitter realize the feasibility of having employees work from home indefinitely, we could see a migration from more expensive housing markets to more affordable markets. For example, if tech industry workers in San Francisco are given the green light to live and work from anywhere, who wouldn't consider trading a closet in a home with multiple roommates for a 3-bedroom home of one's own with a pool in Minnesota or Wisconsin? A shift like this, if it comes to be, could take months to years to play out fully, but migration from higher-priced markets could mean buyers with deeper pockets moving into attractive markets like the 7 Rivers Region.
· Depending on the economic picture down the road, as well as tourism, we could see an uptick in mortgage loan defaults and bank-owned residential properties hitting the market.
· Also of note: with tourism taking a direct hit, investment property owners are in a precarious situation, some with no income during lockdowns, and increasing safety regulations from the third-party sites where they list rentals. Could we see a movement away from the vacation rental property business altogether? Maybe. Could that free up residential housing? That's possible, too, though it's nearly impossible to predict.