The biggest impact most real estate agents are experiencing from this current pandemic is a significant slowdown in the number of transactions compared to what we would see in a normal, “non-pandemic” year.
Spring is when we typically see an increase in homes hitting the market. The leaves are seen on the trees again, the grass is green and the sun is showing itself more frequently.
Inventory of homes for sale has remained low through the winter so, with interest rates low, buyers were hopeful to see more homes available for sale.
Unfortunately, that’s just not going to happen. Many seller’s who had planned to put there home on the market to sell have decided to wait out the pandemic and give it a couple of months to see how things go. This is totally understandable.
Why risk having strangers walking through your home during a global pandemic if you don’t have to?
So the question is, how will the real estate market respond once the “all clear” is sounded and people begin to venture out again? According to an article published by the National Association of Realtors (NAR) on April 9th, many Realtors remain hopeful for a post pandemic rebound.
We believe that the real estate transactions that are not occurring now are not transactions lost, but rather transactions delayed. The reason for the optimism is the fact that unlike the Great Recession of 2008, our current economic situation has nothing to do with the real estate market.
In fact, the real estate market was very strong going into 2020.
Below is a graph showing household equity vs mortgage debt between 2000 and 2018.
The graph shows how mortgage equity was well above mortgage debt between 2000 and 2005, but when lenders became greedy and started servicing crazy loans, mortgage debt began outpacing household equity in 2005 which created a housing bubble that eventually burst in 2008.
The Great Recession of 2008 was caused in large part by the unstable and unsustainable housing market. Thankfully, the housing market in 2008 is totally different than the housing market we are experiencing today.
According to NAR Chief Economist Lawrence Yun, “Home sales will decline this Spring season because of unique economic and social consequences resulting from the coronavirus outbreak, but much of the activity looks to reappear later in the year.”
He goes on to add, “home prices will remain stable because of a pandemic-induced reduction in inventory coupled with less immediate concerns over foreclosures”.
So the bottom line is this, although the pandemic has slowed real estate activity in the short term, the expectation is that the real estate market will emerge strong.
If you were planning to buy or sell a home this year but are having second thoughts, my encouragement to you is to just be patient. Prices are stable and interest rates are low. The pandemic WILL end and things WILL get better. Much better!