The 2020 real estate market started out strong, interest rates were low, housing starts were up and buyers were ready to purchase homes. Just as the spring market was ready to take off, COVID-19 hit. After being told to stay at home and isolate, the U.S. economy and the real estate industry came to a standstill. Now that the country is slowly opening, buyers and sellers are wondering how COVID has impacted home values.
How COVID-19 Has Affected the Economy
COVID-19 has financially affected millions of Americans as many people lost their jobs or were temporarily furloughed. According to the Bureau of Labor Statistics, unemployment levels reached 14.7% in April. This was the highest recorded unemployment rate since the Great Depression. The Bureau of Labor Statistics reported that unemployment levels dropped to 13.3% by the end of May. Unemployment benefits and money from the CARES Act helped to soften the blow for some but not all. Small business owners were able to apply for loans and some employers were then able to pay their employees.
From the real estate perspective, the good news is mortgage interest rates remained at historically low levels. Some economists believe that real estate will be the driving force in improving the economy.
How COVID-19 Has Affected Real Estate Transactions
When the stay at home orders were issued, some states deemed real estate as non-essential. In the states where real estate was deemed essential, transactions looked completely different. Real estate agents had to do most of their business online. They were conducting appointments via online meeting platforms such as Zoom, Skype and Webex. Home sellers could put their homes on the market, but buyers couldn't tour the homes in person. Sellers were relying on photographs, virtual tours and videos to sell their homes. Appraisers were doing exterior appraisals and some title companies were even doing drive-up closings.
Now, in many states, in-person showings are allowed again. If the homeowners, buyers and their real estate agents feel comfortable, "no touch showings" are being conducted. This means that only the showing agent can touch doorknobs, closet handles, cabinets and light switches. People are cautious and safety measures are being taken. All parties must confirm that they are not exhibiting any signs of illness however everyone needs to wear a mask. Some agents are even providing shoe covers, gloves and hand sanitizer in listed homes.
How Have Real Estate Prices Been Impacted?
For the most part, home values have remained unchanged with minor deviations both upward and downward in some areas. As a result of COVID-19, the overall inventory of available homes is very low. Despite the economic toll COVID-19 took on many people, there are still more buyers currently on the market than listed homes. It is predicted that more and more buyers will be able to purchase homes as they return to work in the upcoming months. In some cases, there will be people that will not qualify to purchase a home because of the damage COVID-19 did to their finances. The large, looming question is how many will lose their homes due to bankruptcy or foreclosure. Unfortunately, this will take some time to play itself out.