3 minute read
Real Estate
REAL ESTATE
COVID-19 AND ITS IMPACT ON HOME PRICES By John Cabezas with LIV AZ Realty other periods of economic and hous-
The real estate industry is facing appreciation to decelerate from current one of the biggest challenge it has levels in 2020, though easily remain in faced in over 13 years: determin- positive territory year over year given ing what impact the current pandemic the beneficial factors of record-low inwill or may have on property values. ventories and a historically-low interest If you are a buyer, you may be hoping rate environment.” for major price reductions because the market generally means downward pressure on prices. been a strong seller’s market for almost ing disruption, we expect home price health crisis is straining the economy. If Freddie Mac: “The fiscal stimulus proyou are a seller, you may be hoping that vided by the CARES Act will mute the the real estate market and the industry impact that the economic shock has on in general does not skip a beat and con- house prices. Additionally, forbearance tinues strongly into 2021. and foreclosure mitigation programs will limit the fire sale contagion effect Economics 101: supply and demand. on house prices. We forecast house The price of housing will be determined prices to fall 0.5 percentage points by supply and demand. Fortunately for over the next four quarters. Two forces us, in Arizona the supply is still very prevent a collapse in house prices. First, low, and demand continues to grow. as we indicated in our earlier research Our Arizona residential real estate mar- large supply deficit. Second, population ket’s strength is measured by supply of growth and pent up household formainventory. In a normal market we would tions provide a tailwind to housing have six to seven months of inventory. demand. Price growth accelerates back Inventory of over seven months is con- towards a long-run trend of between 2 sidered a buyer’s market, and a buyer’s and 3% per year.” pressure on prices. The opposite is true Mark Fleming: “The housing supply for inventory with under six months. remains at historically low levels, so That would indicate a seller’s market, house price growth is likely to slow, but and a seller’s market would put upward it’s unlikely to go negative.” In 2019 and into 2020, housing inven- placed on hold, but it appears home tory has hovered at about three months prices will remain steady throughout worth. Based on these numbers it has the pandemic. report, U.S. housing markets face a The bottom line: our economy has been two years. Even though buyer demand A Cuban born has decreased dramatically during the immigrant and COVID-19 pandemic, the number of businessman, homes on the market have decreased as John spent 25 well. In the recently released Existing years as an Home Sales Report from the National executive in corAssociation of Realtors (NAR), it was porate America, revealed that we currently have 3.4 has co-written a months of inventory. This means home real estate ‘How values should maintain or increase, To’ book, is a three-time guest on Real even during the pandemic. Estate Matters (960AM) Talk Show and is currently a partner and Realtor Here is what some experts are saying: at LIV AZ Realty. In his 20 years as a Realtor, John has been involved in Ivy Zelman of Zelman Associates: major remodel and renovation projects “Supported by our analysis of home throughout the valley. View his real price dynamics through cycles and estate blog at livazrealty.com.
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