Real Estate in the Time of Coronavirus
Updated: Apr 23, 2020
The coronavirus pandemic is causing all sorts of changes across the country and is affecting every aspect of the US and World economy. Here are some ways the coronavirus is impacting the real estate industry.
Where was the market prior to the pandemic?
As you may be aware, the real estate market has been booming for the last couple years with sale prices for homes increasing or staying high since the early 2010s. This was no different prior to the pandemic reaching the United States. Prices were as high as ever! The inventory for homes had decreased markedly from the same time in 2019, so there were far fewer homes for buyers. However, interest rates were as low as they have been for the past 20 years, which was a major incentive for buyers.
We are not seeing a big effect yet...
For now, we are not seeing a large decrease in the sale of homes or the average sale price of homes. Unlike the stock market, the housing market was not see huge fluctuations in price over short periods of time due to the nature of how homes are priced and how long it takes for homes to sell. Therefore, it is not surprising that we have not seen a rapid change in the housing market.
...but we expect a change
Given that many experts had predicted a recession in the housing market even before we knew of the coronavirus pandemic and the fear that coronavirus has caused in people, it is reasonable to expect a decrease in the number of homes listed, sold, and the average sale price. Here are some reasons we expect to see a downturn in the real estate market over the coming months
Due to coronavirus fears, many sellers will choose to not list their homes because they may be afraid of contracting the illness or may fear their home will not sell. Buyers may be less willing to see homes due to fears of getting the disease.
Showing homes will be more difficult during quarantine because of the limit on the number of people that can congregate in homes at any given time. Therefore, real estate agents must set up private showings of homes with individual prospective buyers. This will limit the total number of people that see homes, which will reduce the likelihood of homes selling.
3. Smoke/CO Detector Inspections
In Massachusetts, it is the responsibility of the seller to assure their smoke and carbon monoxide detectors pass inspection. Inspections are performed by local fire departments. Due to the coronavirus, many fire departments are NOT inspecting smoke and CO detectors for the purpose of real estate sales. A temporary law has been passed that puts this responsibility on the buyers of homes. This may cause minor delays, but should not be an issue as we progress and it becomes normalized.
4. Home Inspections and Appraisals
Although many home inspections and home appraisers are still going to homes, some are not, which can delay the closing of a home. For home inspections, although not required, it is highly advisable for buyers to have one performed when buying a home to make sure there are no major issues with the home. Lenders require appraisals of homes, so it is vital that appraisers continue to go to homes for closings to occur. As we progress through the pandemic, if home inspectors or appraisers become harder to find, then closings will be delayed.
A Note On New Construction
As I noted earlier, the inventory of homes is very low compared to the same time in 2019. Therefore, it is crucial that new construction of homes continue to increase. However, we will likely see a slowdown in the construction of new homes due to coronavirus. For one, some towns and cities have stopped construction. Also, some construction workers are choosing not to work or are sick and cannot work, which will slow down jobs. Finally, and most crucially, breaks in the supply chain due to the shutdown of factories domestically and abroad will prevent supplies from getting to construction sites and will slow down the construction of new homes and limit inventory.
In the end, the most important thing is to stay safe and healthy. The real estate market survived the collapse in 2008 and will survive this pandemic. If you do intend on buying or selling a home, please make sure to practice social distancing to keep you and you family safe and healthy.
Tim Walsh, REALTOR® is a licensed (#9557151) Massachusetts real estate agent with Century 21 The Real Estate Group. Tim primarily works in Central Massachusetts including the following towns: Milford, Hopedale, Mendon, Upton, Medway, Bellingham, Hopkinton, Holliston, Franklin, Uxbridge, Northbridge, and Blackstone. If you have any questions or need help buying, selling, or investing in real estate, call (508-494-9634) or email (firstname.lastname@example.org) Tim today!