Post covid19 real estate slump, things seem to be returning to normal as restrictions are being removed.
United States – May 26, 2020 /MarketersMedia/ —
The United States real estate market has been in a COVID-19-induced slump for months. The nationwide lockdown has, for obvious reasons, meant the shuttering of open houses and a huge business interruption for realtors across the country. Luckily, most states have begun lifting restrictions gradually, and the economy is starting to gather steam once more.
What does this situation entail for the housing market in the United States? Every locale has its specific circumstances when it comes to real estate, but there are some uniform trends that have been spotted across the country.
For quite a few financial quarters, the U.S. was in the throes of a seller’s market. The demand stemming from new home buyers was consistently higher than the supply of homes; meaning that the sellers could easily dictate the terms. And now that the markets are beginning to reopen, it would seem that housing shortages would be even greater — further cementing the seller’s advantage in the real estate world.
However, the situation is a bit more complicated than that, and houses are not snatched up quite as fast as some experts expected. The inventory is definitely at an all-time-low, with certainly less homes available on the market compared to the period before the pandemic.
The problem is in the significant fall of purchasing power across the board — which has also had a significant effect on the housing market as well. Many buyers who were deep in the search for a home before the COVID-19 pandemic hit were now left without jobs. Even basic necessities are in question, seeing as the payments via unemployment checks have been late in the past two months. The ability to secure financing for a mortgage is hugely diminished among the average home buyers.
All of this points to an unfortunate fact — the housing market won’t come back in full swing as soon as the gates open. It will take at least the end of this year for all the pieces to fall back into place. On the bright side, the fact that the housing market was in rude health before the pandemic is what saved it from even bigger depression.
As things stand now, people whose livelihoods were not endangered by the pandemic are slowly beginning to return to their daily lives. Long-term planning is becoming normal for personal financing yet again, and people are thinking about buying homes.
Open houses have begun anew in neighborhoods across the country in the past two weeks, and demand is showing signs of improvement. People are still taking the necessary precautions in terms of social distancing, and prospective home buyers are waiting in line as to not overcrowd open houses. Most individuals browsing homes are wearing masks as well.
Compared to May 2019, the market metrics are definitely not ideal. Sellers and buyers alike have recused themselves from the market in the past month, and it definitely shows. The number of home listings have declined by 40% compared to this time in the previous year.
It should be noted that this situation has faced complementary industries whose fate is closely tied to that of the real estate industry. These are primarily moving companies and homebuilders.
The lockdown has hit the nation’s movers as hard as it has hit the realtors; perhaps even more. When people are quarantined, obviously, no goods are transported across the country. At least not in the volume usually handled by moving companies. While postal and courier services actually faced a surge in demand due to people shopping more online — this was not the case with moving companies.
Legitimate businesses listed on verifiedmovers.com have suffered significant losses due to people putting off relocating to new homes. Even individuals who purchased homes immediately before the pandemic have largely postponed their actual move; leaving moving companies out of work for weeks. When this is coupled with the fact that new home sales have been practically nonexistent for the same amount of time, this has resulted in huge losses for all industry members. Luckily, industry representatives state that most moving companies who needed federal COVID-19 loans have applied and were in the middle of the approval process.
Conversely, homebuilders are starting to experience quite a burst in terms of demand. The supply of homes was already low before the pandemic, resulting in a seller’s market. There’s another reason for this — most new homebuyers in the recent years have been millennials, who prefer apartment buildings urban living. For their tastes, suburban living was too far removed from their lifestyle amenities.
The COVID-19 pandemic seems to be reversing this situation at least moderately. For the first time in years, homebuyers of all ages are looking to more spacious homes and something more removed from the bustling urban cores.
There is no conclusive data backing this up just yet; that will be easier for examination by the end of the next quarter. However, anecdotal recountings by realtors indicate that people who were avid apartment buyers and renters have now shifted to single-family houses. That’s why homebuilders who thrive on suburban housing are faced with a surprisingly bright financial outlook.
It should be noted that technology is changing how people are approaching home buying. With the advent of virtual reality tech, the need to physically browse homes has diminished. Naturally, this is something that only first adopters in the tech world have been paying attention to; most people would still go out and personally visit open houses.
The social distancing psyche of the coronavirus has changed this, perhaps for good; many more buyers are trying to find ways to avoid unneeded physical contact, and real estate VR may be just what the doctor ordered.
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