Last week I wrote about a seller’s market, which we are in at this moment in time. I cautioned about sellers not getting too smug about the value of their property, and how markets can turn on a dime. Since real estate markets lag well behind stock prices, we don’t know yet what effect the coronavirus will have on buyers’ commitment to moving forward, but if the stock market is any indicator, turning on a dime may have been an understatement.
If your home is on the market and you need to sell, you’re in a totally different place than you were a few months ago. No one knows exactly how the coronavirus will impact business, manufacturing, tourism and housing. It doesn’t take much for buyers to get spooked during a crisis and put everything on hold until the immediate danger is over, and things return to normal. Since we haven’t experienced a world-wide epidemic as vast as this one in most of our lifetimes, we have no idea how people will react. But here is some of what the experts are focusing on.
To me, the most interesting fallout of this epidemic and something that affects all homeowners or potential homeowners is the influence on interest rates. If you’ve been watching the stock market, you’re seeing a sell-off of stocks, driving investors to park their money in safer assets like U.S. Treasury bonds. Typically, when bonds are strong, mortgage rates fall. As of this writing, the average 30-year, fixed-rate mortgage was 3.34%, and the Federal Reserve has already cut rates and will consider further action if necessary.
This should be a perfect buying storm for buyers, but it’s not that perfect. As stated continually, there is a shortage of inventory all over the country and particularly in Florida, with the result of increased selling prices. Couple that with a big unknown in everyone’s life and the wheels of business could easily grind to a halt. Non-essential purchases like boats, RVs, renovations and second home purchases will surely feel the pain if this virus isn’t contained soon.
Secondly, we have a lot of foreign buyers in this country, many of them wealthy Chinese who are buying luxury properties in big northeastern cities and in Florida. The National Association of Realtors’ chief economist Lawrence Yun said the outbreak may make it more difficult for Chinese buyers to pick up U.S. properties for now, but it could be a boom for the market long term. The Chinese real estate market has plummeted 90% since the virus’ outbreak, and when the dust settles, Chinese buyers may more than ever be looking for diversification and a secure place to invest their money for the long term.
As I write this, the stock market is down another 800 points and more than 100,000 people around the globe have been infected by the coronavirus. You have to assume that most buyers and sellers are putting everything on hold waiting for this to end; you can’t look at real estate if you’re worried about being quarantined, as remote as that may sound right now.
I’m positive I will, unfortunately, be writing more about the coronavirus’ effect on the real estate market before we’re done with it. In the meantime, stay calm, wash your hands, renew your Netflix account and try not to look at your financial statement.
