How COVID-19 will affect the housing market
Everyone knows the nationwide shutdown caused by the COVID-19 pandemic has impacted every area of our lives, including the real estate market. The timing couldn’t have been worse. For over two years, home buyers have contended with a persistent seller’s market, which has shrunk inventory and driven up home prices. The one ray of hope during this imbalance between buyers and sellers has been the seemingly unstoppable economic boom. With record low unemployment and high consumer confidence, plus low interest rates, buyers could still find a home. The steady march in the number of closed sales proved that.
Those days seem to have passed.
But there’s more to the story. First, let’s examine the latest numbers.
As of April 30, the number of months supply of homes for sale dropped by 28% to 1.8 months. The inventory of homes for sale plummeted by 2,505 units, a loss of 24.9%. Once again, as inventory has dropped, prices have risen. The percentage of original price received this month nosed upward by .7%, while the median sales price posted an 8.1% gain from April, 2019, an increase of $20,500.
As you can see, the housing market isn’t yet showing the effects of the slowdown. Next month’s report will more clearly reflect COVID-19’s impact – we just haven’t seen it yet. While many have lost jobs, making them ineligible for a home mortgage, some sellers have taken their homes off the market, worried the loss of potential buyers will reduce the price they can receive.
Despite these developments, there are real glimmers of hope. As Joel Kan, an economist with the Mortgage Bankers Association has noted, “Prospective buyers [are] gradually returning in the various parts of the country that are reopening.” Kan also points out that purchase mortgage applications have increased the past three weeks. North Carolina has just launched the first of three phases of its reopening plan, allowing more stores to resume business. Meanwhile, in nearby South Carolina, restaurants are resuming in-house dining, and beaches are allowing tourists. Business as usual is far, far away, but the ice is melting.
Plus, with the government stimulus package absorbing much of the blow to our pocketbooks, and with most consumers expressing confidence the economy will eventually heal, there’s solid reason for optimism.