The COVID-19 pandemic has affected the entire world, in both private and public arenas. Many questions are left in its wake, including what will the impact be on home property value? While uncertainty abounds and no answers can be known definitely, predictions and projections can be made. To help answer the question, let’s review trends in the housing market just a month or two ago, current conditions relevant to housing, and expert opinions on near- and long-term impacts on property values.
Many aspects of the housing market were trending positively at the beginning of the year.
- The inventory of homes for sale was at record lows and demand vastly outstripped supply; at the end of 2018, there was a shortage of about 340,000 homes.
- But construction of new homes was on the rise by the end of 2019, with record-high numbers of house starts initiated and building permits filed. The building industry reached the highest level on the National Association of Home Builders’ monthly confidence index since 1999.
- Mortgage rates remained low and were predicted to continue to fall below four percent.
- Home prices and property values were slowly increasing.
- Unemployment was at a low 3.5 percent, meaning a greater pool of potential buyers with income.
In mid-March, the federal government declared a national emergency and states began issuing stay at home orders. As the number of coronavirus cases in the United States climbed, the number of businesses forced to close also surged. The stock market crashed, supply chains were disrupted, and economists declared the country was entering a recession. As of April 2020, most agree that the nation, and much of the world, is experiencing a virus-induced recession.
- By the first week of April, more than 10 million people applied for unemployment insurance benefits, with estimates of the country’s unemployment rate around 13 percent, the highest since the Great Depression.
- Home sellers seem to be holding off on listing their properties. In the weeks ending March 21 and March 28, when compared with the same period last year the number of newly-listed properties fell by 13.1 percent and 34 respectively.
- Home list prices were only up 2.5 percent for the week ending March 28, representing the slowest rate of listing price growth since 2013.
- Mortgage rates are at near historic lows, yet the number of mortgage applications for loans used to purchase homes was down 24 percent for the week ending March 27, when compared with a year ago.
Overall, then, fewer homes are being listed for sale and fewer homes are being purchased, yet property values remain relatively steady.
Given the trajectory of the pandemic is not yet known, with no immediate end in sight, it is probably too soon to make reliable predictions about post-pandemic property values. However, many experts’ outlooks remain tentatively positive. Studies of previous pandemics suggest that home prices will not fall very much, if at all. The economy and the housing industry were strong before the pandemic and might rebound quickly once the crisis ends. Housing prices do tend to decline during a recession, but that is not guaranteed. Home buyers with income unaffected by the recession might capitalize on the opportunity to buy a home with a low mortgage rate, and with enough home buyers in an area, demand could drive property values higher.
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