4 minute read
If you thought Coronavirus would save the housing
I F Y O U T H O U G H T C O R O N A V I R U S W O U L D S A V E T H E H O U S I N G M A R K E T, Y O U W E R E W R O N G . HOUSE PRICES ARE STILL RISING
Lewis Sanders III
World economies are shrinking. Businesses are shutting down, and jobs are rapidly disappearing thanks to the Coronavirus Pandemic. According to the Department of Labor and Statistics, the unemployment rate in the country in May 2020 from 13.3 percent, which was a drop from the previous month’s rate of 14.7%. However, the housing prices in the country keep on rising despite the Coronavirus pandemic.
In the last recession, the home prices in the country took a plunge, causing millions of people to lose their homes. Moreover, during this recession, there is a likelihood that the home prices could start eroding again, especially when the mortgage forbearance ends.
According to a report released on May 12 by the National Association of Realtors, home prices increased in the first quarter of the year despite the coronavirus pandemic. NAR analysis of the country’s metro housing markets shows that the home prices of the median single-family home prices increased year over year in 96% of the U.S. housing markets
in the first quarter of 2020, which is a 2% increase compared with the first quarter of 2019.
Additionally, looking at the house prices in the first quarter of 2020, they sat at $274,600, which represents an increase of 7.7% from the same period in 2019. There were price increments in forty-six metros, especially those in the Southern and Western markets, with some double-digit recording jumps. These markets are; Boise City, Idaho, Eugene, Oregon, and Colorado Springs, Colorado.
The NAR analysis of these markets shows that all the regional median single-family prices rose as compared to 2019: The Northeast (9.7%), Midwest (7.5%), South (7.5%), and West (7.5%).
“The first quarter price jumps mostly reflect conditions before the coronavirus outbreak and show the strength of the housing demand prior to the pandemic. Even now, due to very limited listings, home prices are showing no signs of buckling.” NAR Chief Economist Lawrence Yun.
“Demand absolutely just got a kick in the gut, but at the same exact time, so did supply,” said Skylar Olsen, senior principal economist at Zillow Group Inc.
Homes typically will go under a contract in a month or two before the contract closes; as such, the March NAR data primarily reflects the purchase decision made in February or January.
However, the question that remains is why home prices are still steady? Real estate is a lagging economic indicator, which means a slowdown in the home price growth will likely be prolonged over the next several quarters and years. So far, we have seen quarters of tight supplies across most U.S. markets, which will help buoy prices.
In the short term, the demand for housing might remain relatively short if the low-interest rates hold for a while, albeit low supply of new housing units. This will help to keep the prices relatively stable. The NAR report indicates that there were 1.5 million homes for sale, which was 10% less than the beginning of 2019.
While it is too early to project the effect of the pandemic on the housing sector in the long run, early signs of the pandemic point to a potential economic downturn that is yet to begin. However, what is ostensible at the moment is that the economic recession of 2020-2021 will be much different from what was there in 2008.
If you would to get more insights about the housing market, especially the Bay Area housing market, get in touch with Lewis Sanders. To find out more about Lewis, follow this link https:// thepowerisnow.com/lewis-sanders-iii/
Sources:
https://www.wsj.com/articles/why-home-pricesare-rising-during-the-pandemic-11588671002 https://www.usatoday.com/story/oney/2020/05/18/ coronavirus-home-prices-first-quarterincrease/111702900/
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