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?