What Impact Might COVID19 Have On House Values

Dated: May 5 2020

Views: 52

Image title

A big challenge facing the housing industry is determining what impact the current pandemic may have on home values. Some buyers are hoping for major price reductions because the health crisis is straining the economy. The price of any item, however, is determined by supply and demand, which is how many items are available in relation to how many consumers want to buy that item. In residential real estate, the measurement used to decipher that ratio is called months supply of inventory. A normal market would have 6-7 months of inventory. Anything over seven months would be considered a buyers’ market, with downward pressure on prices. Anything under six months would indicate a sellers’ market, which would put upward pressure on prices. Going into March of this year, the supply stood at three months – a strong seller’s market. While buyer demand has decreased rather dramatically during the pandemic, the number of homes on the market has also decreased. The recently released Existing Home Sales Report from the National Association of Realtors (NAR) revealed we currently have 3.4 months of inventory. This means homes should maintain their value during the pandemic. This information is consistent with the research completed by John Burns Real Estate Consulting, which recently reported: 

“Historical analysis showed us that pandemics are usually V-shaped (sharp recessions that recover quickly enough to provide little damage to home prices).”

What are the experts saying?

Here’s a look at what some experts recently reported on the matter:Ivy Zelman, President, Zelman & Associates

“Supported by our analysis of home price dynamics through cycles and other periods of economic and housing disruption, we expect home price appreciation to decelerate from current levels in 2020, though easily remain in positive territory year over year given the beneficial factors of record-low inventories & a historically-low interest rate environment.”

Freddie Mac

“The fiscal stimulus provided by the CARES Act will mute the impact that the economic shock has on house prices. Additionally, forbearance and foreclosure mitigation programs will limit the fire sale contagion effect on house prices. We forecast house prices to fall 0.5 percentage points over the next four quarters. Two forces prevent a collapse in house prices. First, as we indicated in our earlier research report, U.S. housing markets face a large supply deficit. Second, population growth and pent up household formations provide a tailwind to housing demand. Price growth accelerates back towards a long-run trend of between 2 and 3% per year.”

Mark Fleming, Chief Economist, First American

“The housing supply remains at historically low levels, so house price growth is likely to slow, but it’s unlikely to go negative.”

Bottom Line

Even though the economy has been placed on pause, it appears home prices will remain steady throughout the pandemic.

Latest Blog Posts

Why Selling This Fall May Be Your Best Move

If you’re thinking about moving, selling your house this fall might be the way to go. Here are four highlights in the housing market that may make your decision to sell this fall an easy one.1.

Read More

The Surging Real Estate Market Continues To Climb

Earlier this year, realtor.com announced the release of the Housing Recovery Index, a weekly guide showing how the pandemic has impacted the residential real estate market. The index

Read More

Why Is It So Important To Be PreApproved In The Homebuying Process

You may have heard that pre-approval is a great first step in the homebuying process. But why is it so important? When looking for a home, the temptation to fall in love with a house’

Read More

The Top Reasons People Are Moving This Year

Today, Americans are moving for a variety of different reasons. The current health crisis has truly re-shaped our lifestyles and our needs. Spending extra time where we currently live is enabling

Read More