April 19th, 2020 11:23 AM by Jackie A. Graves, President
The coronavirus pandemic has blindsided the U.S. housing market,
transforming the spring selling season that’s traditionally the annual peak of
sales into a deep valley.
Buyers, fearful of venturing out or no longer able to qualify
for mortgages, have retreated to the sidelines. Sellers, not keen to invite
strangers in for tours, have yanked homes off the market or decided not to
“The reality is that most owners who had properties on the
market pulled them off,” says Kobi Lahav, sales director at LivingNY, a real
estate brokerage in Manhattan. “There’s no point in putting anything on the
market right now.”
How far might home sales fall? And how long might transactions
remain depressed? As with most questions about the coronavirus crisis, the
answers hinge on the duration and the severity of the COVID-19 outbreak.
For now, the drop in sales activity has been sharp enough that
even Realtors, normally an optimistic bunch, are issuing uncharacteristically
stark assessments of the market. Brokers in New York City say sales have
plunged by 70 percent or more. Realtors in California also report a bleak, if
slightly less severe, picture.
“This industry is just doing a very slow crawl,” says Leslie
Appleton-Young, chief economist at the California Association of Realtors. “I
don’t think it’ll go to zero, but over the next couple months, you’re going to
see some sharp declines – 50 percent, two-thirds, maybe in that range.”
Housing economist Brad Hunter, managing director at RCLCO Real
Estate Advisors, likewise expects home sales to drop by 50 percent to 70
percent in the coming months.
“The resale market is being quite badly shut down,” Hunter says.
“Sellers are pulling their listings off the market. They don’t want people in
their homes, touching things and coughing and sneezing.”
Countries that were hit early by the coronavirus
declines in sales volumes, says Mike DelPrete, a scholar-in-residence at the University
of Colorado at Boulder. China’s 30 largest cities saw a nearly 100 percent drop
in sales. While transactions have bounced back some, they remain at half their
pre-pandemic levels, he says.
Italy experienced a drop of 70 percent to 90 percent, while
South Korea saw transaction volumes plunge by 80 percent.
The toll on the U.S. housing market promises to be similarly
harsh, DelPrete says. With new listings cratering nationally, sales will follow
“If you have a 70 percent drop in new listings coming to market,
you’re probably going to have a 70 percent drop in transactions in two months,”
DelPrete says. “I see no reason to be more optimistic, as sad as that is to
Spring is the traditional high point for the U.S. housing
market. Buyers want to settle into a new place before the school year starts,
and the real estate industry ramps up in March for a frenzy of activity.
Because buyers need weeks or months to tour properties, negotiate a price and
secure a mortgage, home shoppers typically start the process in April and May.
The U.S. housing market entered March poised for a stellar
spring. Mortgage rates were at
rock-bottom levels, unemployment was at historic lows and Americans’ paychecks
Amid that promising backdrop, the coronavirus forced a
near-freeze in the housing market.
Public health concerns are only part of the problem. There’s
also the economic toll – millions of Americans have endured job losses or pay
cuts since mid-March. That reality is scuttling many deals, particularly for
buyers who had hoped to borrow amounts that pushed the limits of their
Lenders have stepped up their scrutiny of borrowers, says Joel
Kan, associate vice president of economic and industry forecasting at the
Mortgage Bankers Association. Before March, lenders typically verified a
borrower’s job status 10 days before the deal closed. Now, with job stability
suddenly in question for many, lenders check three days before closing.
“We have a much gloomier macroeconomic picture and employment
picture,” Kan says. “There’s just a lot of additional complications.”
The full impact of the coronavirus slowdown is unlikely to be
clear until late May. That’s when the National Association of Realtors will
report sales volumes and prices for April, the first full month of life in a
A sharp drop in listings isn’t the only leading indicator of a
slower market. In another sign of slowing sales, real estate companies have
been cutting back. In one notable example, Seattle-based Redfin furloughed 40
percent of its 1,500 agents until September.
Meanwhile, iBuyers Opendoor, Offerpad, Zillow Offers and Redfin
Now have suspended their buying activity. The new breed of buyers made more
than 5 percent of home purchases in such Sun Belt markets as Atlanta, Charlotte
Another pressing question raised by the pandemic: How will
coronavirus affect prices?
Some housing experts predict the pandemic will cause a
double-digit decline in values. One
New Jersey analyst told Bloomberg he’s forecasting a 12 percent drop in prices there.
But others say any price declines are likely to be modest, if
only because sellers will simply decide not to sell rather than sell for a
Douglas Wagner, director of brokerage services at Bond New York
Properties in Manhattan, says he has seen many would-be sellers renovate their
apartments in anticipation of the spring selling season, only to decide not to
“They hit the brakes and said, ‘Wait, I don’t want to be a
victim of predatory buyers who are looking for a 20 percent discount,’” Wagner
The National Association of Realtors and the Mortgage Bankers
Association both anticipate a sudden rebound in economic activity and no
lasting effects on home prices.
Those forecasts factor in the reality that there was a shortage
of homes for sale heading into the spring selling season, and the coronavirus
pandemic has only tightened supply. That’s a dramatically different set of
circumstances than the housing market faced during the last downturn, which was
sparked by a mortgage meltdown and a housing glut.
“I don’t think this is 2008,” Hunter says. “We’re not in a state
where the entire financial system is under stress.”
The consensus among housing analysts is that home sales will
restart quickly, pushed along by the tailwinds of low mortgage rates and
delayed demand from all those buyers who had to sit out the start of the
“It’s like hitting the pause button,” DelPrete says. “When you
resume and hit play, we’ll pick up where we left off. However, all the economic
uncertainty is the wild card.”
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