The real estate and mortgage market in the United States has been significantly affected by the Coronavirus outbreak, much like any other essential service industry in the country. Due to COVID-19, the real estate market recorded an 11.5% decline in the last week of March, compared to the previous year. The impact of the pandemic varied by location, but Redfin Market Tracker reported that real estate sales dropped sharply overall. Epicenters such as New York were greatly affected, where sales dwindled by a whopping 18.3%.
Real-estate Sales Drop Due to COVID-19 Outbreak
A study released by OJO Labs stated that 80% of supposed buyers postponed their purchase due to the fear of not knowing what lies ahead. Some consumers are afraid to move forward as jobs are unstable during these times. Future employment opportunities have also become unclear, so some potential buyers cannot allocate funds to purchase a new property. Others cite not being able to tour houses physically as the reason for why their search for a new home has temporarily come to a halt.
Owners who were also previously planning to sell have decided to renovate their houses instead of acquiring a new home. People are adding home offices since many work setups have been adjusted and they expect to commute less. Coincidentally, buyers are now putting home offices on the top of their priority list when looking for a new home to buy. Even though these were previously considered “wants”, the Coronavirus is making working from home a little more normal than usual. Factors such as distance to one’s workplace now play a less important role. Instead, customers look for homes with more space and rooms that cater to remote work.
Virtual Property Tours Become “Necessary”
But while others are set on not buying a house without an actual visit, virtual showings have become more popular. As the world adapted to the COVID-19 outbreak, the real estate market has adjusted pretty well with it. Many agents have modified their tours to be 100% virtual so that interested buyers can still consider which property to buy. This came as a shock to the industry as more people are used to visiting homes before putting in an application. But on recent occasions, even properties amounting to $1.2 million are being sold in the market despite the buyer not seeing the property in person.
Many customers still hesitate to put their money on a house that they are not able to physically visit, but real estate agents have now deemed online showings “necessary” especially in the time of the pandemic. Virtual sales and consultations have become standard practice. Even as stay-at-home orders were lifted and visitations were allowed again, agents have had to make sure to follow all necessary precautions set by local health departments. Property visitors are required to wear masks, sanitize their hands, and are advised not to touch any part of the home they’re looking at.
Homeowners have also become more reluctant about letting strangers into their properties, especially the ones who are still living in their residences. Despite the desire to market their houses, people are putting primacy to the health of their families. Any contact with people from outside exposes everyone to risks of contracting the virus, and many people won’t take any chances.
Mismatch in Supply and Demand Blows Up Property Prices
Even with the dip in sales over the past few months and the qualms on the safety of looking at homes at the moment, prices are actually growing instead of the expected decline. The ease in shelter-in-place orders in many states is now blowing up prices of properties. The lockdown created a pent-up demand for new homes, and the supposed sales in March, April, and May are now being allocated to June, July, and August.
The housing supply was already limited during the previous years, but the demand right now has been especially high as a result of the pandemic. More consumers are now allowed to look at properties and more sales are expected over the summer. Limited listings have driven prices up and are now launching bidding wars amongst consumers. Prices in some Metros jumped double digits, including Boise City, Idaho (18.1%), Eugene, Oregon (14.5%), and Colorado Springs, Colorado (14.4%).
Brokers are advising clients to let go of minor concerns such as basic repairs which could otherwise be negotiated at a less competitive time. Jay Rinehart Jr., a broker in Rock Hill South Carolina, coached potential customers who were looking at seven properties within their price range. Only three were left by the end of the week.
Historic Low Mortgage Rates Attract More Buyers
Mortgage rates have also become surprisingly low, but shoppers are currently facing an extremely competitive market. More people are applying for mortgages over the previous weeks because rates are at a historic low, amounting only to 3.15% compared to last year’s 3.82%. The low rates are a piece of wonderful news to those looking to purchase more expensive homes.
The low-interest mortgage rates coupled with first-time owners’ drive to purchase a property puts real estate on fire. Families who have been planning to move even before the quarantine period are also now actively looking for their next home. The real estate and mortgage market is recovering, and it’s recovering fast. There simply isn’t enough supply to match the demand that has been pent-up for months.