The impact of the Coronavirus on the real estate market

In this time of stock market volatility, consumers and investors are all scared. The coronavirus impact significantly the economy and therefore the the people’s incomes and employment.

The real estate market is not the stock market. It’s slower moving and the sale and rent fundamentals do not wing wildly from day to day. We actually expect that it could have a positive impact due to the potential drop in mortgage rates. Lower mortgage rates  would make homebuying more affordable.  

On Sunday, March 15th, 2020, the Federal Reserve announced a second emergency interest rate cut since the coronavirus outbreak, bringing the yield on Treasury bonds to almost 0%.

When investors start thinking the stock market is too risky—like right now—they sell their stocks and buy bonds. The increased demand pushes the price of bonds higher. The higher the price of bonds, the lower the interest payment—called the yield—is relative to the price. When bond yields are lower, mortgage rates are lower, too.

On the demand side, experts suggest that there will be a lot of buyers in the market because low unemployment, solid wage growth and low mortgages rates are all signals of high demand. 

Further, the impact of the coronavirus on the real estate market will vary by location. For instance, it is expected that cities such as New York City and San Francisco will be much more negatively impacted on the housing market because of the high cost of properties.

While the 2008 financial crisis saw both housing and stock markets drop in tandem, the housing market crash was ultimately the cause of the stock market crash although typically the housing market isn’t tied to sings in the stock market because people don’t buy houses purely as an investment. Housing is a basic need ; a stock market correction doesn’t change these circumstances for people. Even in full-blown recessions, the housing market is incredibly durable. In some previous recessions home prices have actually gone up.

Finally, when the stock market drops, investors look for safer places and less volatile investment options to park their wealth, such as on the housing market.

Another thing to consider is that  a majority of home building material inputs come from China, therefore this could delay home construction. This will increase the demand to buy properties instead of constructing new ones, which is good for real estate investment companies such as BaltimoRealEstate LLC.

To conclude, even if the impact of coronavirus induces a recession, don’t expect home prices to drop. It would likely just slow down the pace at which they are rising.

However, we need to stay positive. Hope is a powerful tool.

Sources :

• https://www.curbed.com/2020/3/6/21163523/coronavirus-economic-impact-housing-market
• https://www.redfin.com/blog/coronavirus-housing-market-2020-impact-survey/
• https://www.cushmanwakefield.com/en/united-states/insights/2020-coronavirus-and-impact-on-the-property-markets
• https://www.capegazette.com/affiliate-post/coronavirus-and-real-estate-market/199561