The world probably doesn’t need another coronavirus real estate post, but here we are. Over the past week I’ve had countless conversations on the topic so I wanted to share some thoughts. How might the coronavirus affect the housing market? Here are some things to keep in mind.
Things to consider about the coronavirus & real estate:
1) Uncertainty: Markets don’t tend to like uncertainty. It’s been true in the stock market over the past week and it’s true in real estate also.
2) Severity matters: If this virus doesn’t spread much there might not be much effect on the housing market. But if it begins to spread in mass it’s easy to imagine sellers postponing listing their homes and buyers choosing to sit on the sidelines. Ultimately as we consider the immediate future there’s a huge difference between having a handful of coronavirus cases versus a devastating outbreak like the movie Contagion (probably not a helpful film to watch right now). Keep in mind if we’re dealing with something that ends up being very temporary it’s not likely to have a lasting effect.
3) Consumer behavior: One of the most relevant things to consider is whether the coronavirus starts to affect consumer behavior and confidence. No matter what you think about this whole thing, if people begin to postpone or halt financial decisions, that’s when it can begin to matter more for the economy and housing market. Let’s remember many buyers are already struggling with a feeling of hesitancy about the market, so for some the coronavirus could end up magnifying that feeling. Are consumers going to dine out fewer times? Will they stop buying stuff? Will they sit on the sidelines of the real estate market to wait and see what happens? We’re at the beginning stages of this and we’ll have answers to these questions over time. Obviously if there was a massive outbreak though it wouldn’t be a surprise to see the housing market stall or decline. In case you wanted to follow consumer confidence closely, here is a source tracking it daily (found via Len Kiefer):
4) Swine Flu & Ebola: Someone asked if I had any market stats from previous decades when we dealt with SARS, Ebola, or Swine Flu. No, I don’t. The struggle with these examples is we didn’t have a local epidemic, so there wasn’t any real impact on the market.
5) The economy: One of the more gloomy elements to watch is the Chinese economy as well as our own. Some writers are talking about the potential for a worldwide recession in light of how tied the world is to China. That’s a sensational idea bound to get lots of attention. Is it real? We’ll see what happens.
6) Rates doing the limbo: In the midst of this we’re seeing mortgage rates drop and some are saying they’ll continue to dip. I’ve even heard claims they could drop below 3%. That would be insane!! So if anything it’s possible we could still have a very competitive real estate market in the immediate future. As a side note, it’s actually been an aggressive start to the year in terms of price growth in Sacramento and I’ll have more thoughts on that next week. For now buyers and sellers seem more focused on low rates than the coronavirus, but let’s keep watching because that could change.
7) Sifting data: Hopefully this will all blow over and we won’t have any worst-case-scenarios play out. If you want to watch real estate data though, be sure to pay attention to the number of listings and sales volume – not just prices. Remember, prices are the last place we see change show up even though it’s usually the first place we look. In other words, we see a market shifting first in consumer sentiment, what is happening with listings, whether homes are selling, and then eventually down the road with price changes. So like I always say, the trend happens before we see it in the prices.
8) Peace: On a personal note, I hope you find peace in coming time no matter what happens in the future. If you’re feeling stressed by all these conversations, maybe get intentional about filtering information and finding ways to add peace into your life.
Anyway, I hope that was helpful. Thanks for being here.
Questions: What are you talking about in coronavirus conversations lately? What are buyers and sellers saying? Anything to add? What did I miss?
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Ryan, your posts are always helpful. My biggest concern is that we are not being informed as we should be, NOT having to do with the possibility that people will die and don’t want us to panic, but because the concerns are more about financial markets. Priorities are clearly misplaced.
Thanks Helen. I totally agree. I guess it seems ironic for me to say that since I just wrote a post about the housing market, but I’m a dude who writes about housing… I share your concern about misplaced priorities. The most important thing here is human life and health. I think it’s easy in today’s world to get numb about stats too, particularly as we talk about other countries.
Thank you for the great post. The vibe that you write this is with grounding and calmness, which is what we all need. And I love #8! Thank you for ending on a positive note in the midst of uncertainty.
Thank you very much Nicki. It’s so important to me to be objective and keep things in perspective. I find personally I’m having to remind myself to remain calm. It’s really helped me to not watch TV right now. I just can’t hang with hearing every bit of news. It’s too much.
Peace….
Yep. May we all have it!!!
I was waiting for Ryan Lundquist’s take on Coronavirus and real estate. I’m definately more concerned about what Coronavirus could do to the economy than the health of the people around me. My family has already held off on booking our summer vacation to wait and see. We would hate to fly somewhere this summer and find out there is an outbreak and everything is closed. I wonder if we were thinking of buying or selling, would it change our decision due to losses in stocks or thinking prices could improve by waiting? I live in the Portland area and my son’s basketball tournament was cancelled last weekend because there was a person working in the school who had been infected and they were concerned about gathering people when there are likely infected individuals in the area who don’t yet show symptoms. These are nothing compared to what people have been dealing with in the center of infected areas, but it makes me realize how quickly things can change and hopeful this fizzles.
Thank you Gary. I appreciate hearing your take. This is exactly what I’m watching too – decisions people are making. My family is holding off on booking a hotel for a vacation this summer. We’re wanting to be sure everything is okay first.
Regarding real estate, I think confidence is something many buyers are struggling with already as many feel hesitant about the market (beyond anything to do with coronavirus). So the advent of health, stocks, etc… is another layer buyers and sellers have to consider.
I share your thought on realizing how quickly things can change. The truth is we act like we have total control over our lives, but there is very little we can actually control.
Great points Ryan….Perspective is everything
Thank you very much Joe. I appreciate it. This conversation can almost seem to become very political right away, but it’s so important to think critically and have a balanced perspective where possible.
The hysteria is real, I grabbed one of the last toilet paper packages at the Folsom Costco on Monday (because we needed tp not because we are worried). This topic came up at last nights Roseville REI meet up. Some said they are holding off on longer term flips and sticking to wholesale deals where they know they can get in an out in case this thing really does spread. Time will tell. To point #2 above, until we know the severity (domestically/locally) it is hard to predict the impact.
Thank you Roxanne. I think your examples are spot on. I appreciate you sharing (and I’m glad you got the TP). 🙂
This is something people are thinking about and it’s definitely influencing behavior and decisions on both small and bigger issues. When there is uncertainty it tends to cause us to pull back. So while some might look at this as a big hoax or a hyped up issue, that’s beside the point. What is real to many people right now is a feeling of not being sure about the future. And meanwhile we have mortgage rates at historic lows to maybe offset some of the uncertainty. We shall see.
Great points, Ryan. If the virus does affect prices I wonder if we’ll have to make a Coronavirus adjustment for sales that were influenced by the frenzy that may occur? It reminds me of the “Keep Calm” memes that remind us to keep our cool and just wait to see what happens as opposed to going crazy and causing crazy things to happen because of our behavior.
A market conditions adjustment could be something we have to consider. Thanks Tom.
I agree. Keep calm. My sense is peace probably won’t happen by accident, so we have to be intentional about cultivating a calm vibe.
Thanks for keeping it all in perspective.
Thanks Mary Lou.
I think the Corona virus is perhaps far worse than being reported. I saw the director of the WHO today mentioning an up to 3% mortality rate. And, this rate is in countries like China where they have adequate respirators (required for treatment for those severely infected). Unlike the flu viruses, the Corona virus can turn nearly anyone with few or no symptoms into a Typhoid Mary. Also disturbing is the fact that some folks have tested positive for the virus, been cleared and tested negative only to relapse and test positive again.
Currently, treatment for severe cases requires something like 2 weeks in an ICU. We do not have the beds or the respirators. Add to that the 3.2 million Americans without health insurance who will have to tough it out and in the process infect millions and millions more of us.
So in simple math, if we have a 50% infection rate among 330 million Americans, that means up to five million of us will perish. Maybe more. Maybe less. But wishful thinking will not make this previously unknown pestilence go away.
Will this transform our economy into one of caring and sharing or a brutal struggle of everyone for themselves? Probably a mixture of both.
Thanks Ricardo. I find either people totally dismiss the coronavirus as a hoax or hype or they are freaked. It almost seems like it’s a political issue to some. I think it’s wise to be cautious and to be very aware. I don’t dismiss what has happened in China, and I don’t trust stats in China either as they tried to initially cover it up. I am intentionally tuning out of some media on purpose, but I am staying informed. I will not be shaking hands at meetings from here on out either. I’m in public speaking at least once a week and I need to minimize my exposure to any type of sickness.
This virus has started what might be the biggest refi boom since 2004. I made one simple post on the biggerpockets facebook group and I received five requests for mortgage refinance quotes.
Hey Gordon. Can you tell me why people are looking to refinance? Lower rates? Tapping equity for an emergency? Thanks.
lower rates mostly. they are at 50 year lows,however ,the last two days they have jumped up a lot.
Thanks for the reply. Not easy these days to connect all the dots.
It’s no joke. Rates this low will influence so many people to refinance. I reached out just to see and I was quoted 2.625% for a 15-year loan. What in the world? Low rates make the purchase market feel crazy too.
We were quoted 2.50% for a 15 year refinance on Friday but missed it since we were out of town. Today it’s 3.125%. It seems they have too much business and are now raising rates to slow things down!
That’s crazy to hear Mark. Wow!!
that is true. If you get a good rate, lock it in fast. Many people think that rates will go lower and that is not true. The last two days they have gone up alot. Hopefully they go back down as lenders get caught up on underwriting.