Coronavirus pushes US housing sales off a cliff
Recovery time hinges on outbreak duration, severity
The coronavirus pandemic has blindsided the U.S. housing market, transforming the spring selling season that’s traditionally the annual peak of sales into a deep valley.
Buyers, fearful of venturing out or no longer able to qualify for mortgages, have retreated to the sidelines. Sellers, not keen to invite strangers in for tours, have yanked homes off the market or decided not to list.
“The reality is that most owners who had properties on the market pulled them off,” says Kobi Lahav, sales director at LivingNY, a real estate brokerage in Manhattan.
How far might home sales fall? And how long might transactions remain depressed? As with most questions about the coronavirus crisis, the answers hinge on the duration and the severity of the COVID-19 outbreak.
For now, the drop in sales activity has been sharp enough that even Realtors, normally optimistic, are issuing stark assessments of the market. Brokers in New York City say sales have plunged by 70% or more. Realtors in California also report a bleak, if slightly less severe, picture.
“This industry is just doing a very slow crawl,” says Leslie AppletonYoung, chief economist at the California Association of Realtors. “I don’t think it’ll go to zero, but over the next couple months, you’re going to see some sharp declines.”
The toll promises to be harsh, said Mike DelPrete, a scholar-in-residence at the University of Colorado at Boulder. With new listings cratering nationally, sales will follow suit.
“If you have a 70% drop in new listings coming to market, you’re probably going to have a 70% drop in transactions in two months,” DelPrete said.
The U.S. housing market entered March poised for a stellar spring. Mortgage rates were at rock-bottom levels, unemployment was at historic lows and Americans’ paychecks were growing.
Amid that promising backdrop, the coronavirus forced a near-freeze in the housing market.
Public health concerns are only part of the problem. There’s also the economic toll; millions of Americans have endured job losses or pay cuts since mid-March. That reality is scuttling many deals.
The full effect of the coronavirus slowdown is unlikely to be clear until late May. That’s when the National Association of Realtors will report sales volumes and prices for April, the first full month of life in a pandemic.
Another pressing question raised by the pandemic: How will coronavirus affect prices?
Some housing experts predict the pandemic will cause a double-digit decline in values. One New Jersey analyst told Bloomberg he’s forecasting a 12% drop in prices there.
But others say any price declines are likely to be modest, if only because sellers will simply decide not to sell rather than sell for a discount.
The National Association of Realtors and the Mortgage Bankers Association both anticipate a sudden rebound in economic activity and no lasting effects on home prices.
Those forecasts factor in the reality that there was a shortage of homes for sale heading into the spring selling season, and the coronavirus pandemic has only tightened supply. That’s a dramatically different set of circumstances than the housing market faced during the last downturn.
“I don’t think this is 2008,” said housing economist Brad Hunter, managing director at RCLCO Real Estate Advisors. “We’re not in a state where the entire financial system is under stress.”