{"id":16240,"date":"2020-04-27T14:23:01","date_gmt":"2020-04-27T21:23:01","guid":{"rendered":"https:\/\/www.homelight.com\/blog\/?p=16240"},"modified":"2026-03-13T10:11:34","modified_gmt":"2026-03-13T17:11:34","slug":"buyer-is-coronavirus-going-to-impact-real-estate","status":"publish","type":"post","link":"https:\/\/www.homelight.com\/blog\/buyer-is-coronavirus-going-to-impact-real-estate\/","title":{"rendered":"Is Coronavirus Going to Impact Real Estate? Yes: Here\u2019s How"},"content":{"rendered":"

You were browsing MLS listings<\/a> and gearing up to begin your home search during the busy spring season. But then COVID-19<\/a> came sweeping across the nation, and your plans were suddenly put on hold. You still want to buy<\/a>, but you\u2019re wondering \u2014 is coronavirus going to impact real estate?<\/p>\n

The coronavirus pandemic has come with a lot of unknowns. One of them is how the fallout from the virus will affect the real estate market. Without a crystal ball, it\u2019s impossible to say exactly what the coronavirus pandemic will do to real estate \u2014 but we can make some educated guesses based on what we know about economics and the market in general.<\/p>\n

Here are the variables to watch that will determine how coronavirus impacts real estate down the road.<\/p>\n

\"A<\/p>\n

 <\/p>\n

Buyer demand<\/b><\/h2>\n

We\u2019ve seen a strong seller\u2019s market over the past few years because there have been more buyers than homes for sale, but this might be changing.<\/p>\n

Before the coronavirus hit, the percentage of agents characterizing their market as favoring sellers was already trending smaller as the year went on<\/a>. In the first quarter of 2019, over 58% of agents said the market favored sellers. By the last quarter of 2019, that number was down to 48%. However, just before the virus hit, a poll of agents in February 2020<\/a> showed a whopping 77% of them classified the market as a seller\u2019s market.<\/p>\n

Of course, all that has changed now that the country has essentially shut down as we wait for the coronavirus to run its course.<\/p>\n

Whether or not the market switches from a sellers\u2019 market to a buyers\u2019 market in the long term will likely be \u201cbased on the region,\u201d says Anthony Sacco, an experienced real estate agent in Rehoboth Beach, Delaware<\/a>, who also has a background in finance.<\/p>\n

\u201cIn my region, if COVID-19 doesn\u2019t continue much longer, I don\u2019t see us moving out of a seller\u2019s market here. We have so many people transitioning here from higher tax areas. But I do think you will have a movement from a seller\u2019s to a buyer\u2019s market in some markets.\u201d<\/p><\/blockquote>\n

Sacco thinks that the kind of impact the virus will have on the market ultimately depends on the duration of the virus. \u201cIf we are held in our homes through May, I think the market will start to go backwards,\u201d he says. \u201cWe\u2019ve seen the stock market increase with the stimulus, but if we can\u2019t get back to work in the next month or so, in some fashion you will see a big economic impact \u2014 it will be impossible for the market not to be impacted.\u201d<\/p>\n

\"\"<\/a>
<\/a> Source: (Andrew Neel \/ Unsplash)<\/figcaption><\/figure>\n

The need for sellers to list<\/b><\/h2>\n

There\u2019s no doubt that sellers have become a little wary of listing during the pandemic. \u201cIn general, we are seeing that sellers are more cautious about people walking through their homes and touching things,\u201d says Jeremy Cupp<\/a>, an award-winning agent in Fayetteville, Arkansas.<\/p>\n

While that wariness is certainly keeping some would-be sellers from listing their homes, other sellers don\u2019t have the luxury of waiting out the virus. Moves, divorce, death, or serious financial troubles will require some sellers to put their homes on the market.<\/p>\n

If there are enough of those sellers (if, for example, the economic impacts are so widespread that a great number of homeowners can no longer afford their homes and sell or foreclose), it could shift the market to a buyer\u2019s market<\/a> nationally. But right now, \u201cthat\u2019s all unknown,\u201d says Sacco.<\/p>\n

Inventory levels<\/b><\/h2>\n

Even before the virus struck \u201cwe were already having a shortage\u201d of home inventory, says Sacco. In the wake of the virus, that shortage has continued, and, in some places, it\u2019s risen significantly.<\/p>\n

Cupp says that in his market, they\u2019ve seen a huge decrease in inventory. \u201cSellers are worried about folks who may be sick walking through their homes and getting them or their families sick.\u201d When it comes to listing their homes, \u201ca lot of sellers are holding off,\u201d he says.<\/p>\n

Other sellers are hesitant to list because they believe the virus is preventing people from buying. But that\u2019s not the case in Cupp\u2019s market, he says. \u201cSellers are getting into multiple-offer situations more frequently now because of the shortage of inventory.\u201d<\/p>\n

On the other hand, \u201cwe have maybe 50% to 60% of the buyers that would normally be looking at this time,\u201d Cupp says. If enough buyers drop out of the market \u2014 but not as many sellers do \u2014 we could see inventory increase.<\/p>\n

However, until inventory levels go up, prices are unlikely to change significantly.<\/p>\n

\u201cHome prices have been steady so far,\u201d says Sacco. \u201cWe haven\u2019t seen significant price dropping at this time. I\u2019ve had a couple properties go under contract, and they were at or close to list price.\u201d<\/p>\n

\"Data<\/a>
<\/a> Source: (Lukas Blazek \/ Unsplash)<\/figcaption><\/figure>\n

Mortgage rates<\/b><\/h2>\n

Low mortgage rates can spur buying activity, and high ones can inhibit buyer activity. In the past few years, mortgage rates have been historically low \u2014 hovering around 4%. In mid-April, mortgage rates hit a 30-year low<\/a>, falling to 3.45% for a 30-year fixed-rate mortgage. Even with the extraordinarily low rate, mortgage applications were down 35% from a year prior.<\/p>\n

Despite the recent economic turmoil, \u201cmortgages<\/a> are still being funded,\u201d says Sacco, though some specialty products like \u201cyour high-dollar loans or your bank statement programs for the self-employed\u201d aren\u2019t being funded as they were before, he says. \u201cBut Fannie and Freddie loans are still funding. USDA is still funding, and so is FHA.\u201d<\/p>\n

Lenders are tightening their belts, though. \u201cA lot of lenders are raising their minimum requirements for buyers,\u201d says Sacco. \u201cI see that some have a minimum credit score<\/a> of 650 and 660, and some are 700 or greater, and that\u2019s affected some buyers.\u201d Before the virus, Sacco says that he saw minimum credit scores as low as 580.<\/p>\n

Investor activity<\/b><\/h2>\n

Even if there aren\u2019t a lot of traditional buyers in the market, fix-and-flip or buy-and-hold investors<\/a> still might be active and keep the market moving for sellers \u2014 especially in areas where rent has been rising or is stable.<\/p>\n

\u201cIn the last few years, it has been difficult for flippers to find properties that they could flip because pricing had moved up so much in my market,\u201d says Sacco. Even with homes that needed work, there wasn\u2019t enough room in price for investors to make a profit, he says. \u201cRegular buyers were buying things that a flipper would normally buy because there was no availability in the market.\u201d<\/p>\n

Sacco says that it\u2019s likely that flippers will see an advantage once everything settles and we have a better idea of how the coronavirus will impact real estate. \u201cThere will be more inventory,\u201d he says. \u201cEven with everything the government is doing, there\u2019s no way there won\u2019t be an increase in foreclosures in the market, and with an increase in foreclosures, there are a lot of homes that will be sold as-is.\u201d<\/p>\n

In the past few years, Sacco says, when banks foreclosed on homes, they spent some money to fix them up because they could make a good profit by doing a little work \u2014 effectively cutting flippers out of the equation. But if things change drastically with the market, flippers will no doubt be able to grab some good deals.<\/p>\n

Anxiety<\/b><\/h2>\n

In general, people don\u2019t want to buy things \u2014 especially enormous things like houses \u2014 when they are nervous, and that anxiety may keep buyers away from the market.<\/p>\n

The Fannie Mae Home Purchase Sentiment Index, which measures consumers\u2019 current views and future expectations of the housing market, fell 11.7 points in March<\/a>, its lowest reading since December 2016. \u201cAttitudes about the current home-selling environment [have] deteriorated markedly,\u201d Doug Duncan<\/a>, Senior Vice President and Chief Economist at Fannie Mae, said in the report. Americans cited COVID-19-related concerns about losing their job as one of the main reasons for their pessimism.<\/p>\n

\u201cI have buyers who are too anxious to buy,\u201d says Cupp. \u201cI have one client in particular \u2014 he backed out of the contract because he was worried about how the virus will affect the economy.\u201d<\/p>\n

Cupp says some of his buyers have been directly impacted by the virus, too. \u201cI do have buyers who have been put on furlough \u2014 though the idea is that they will have their job again once the stay-at-home orders lift and we can start looking again,\u201d he said.<\/p>\n

But while some of his buyers have backed away from the market, Cupp says he still has a lot of buyers who aren\u2019t worried at all. At the end of the day, Cupp is optimistic. \u201cWhen the virus lifts, I feel like the market in our area is going to explode.\u201d<\/p>\n

Header Image Source: (Francesca Tosolini \/ Unsplash)<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

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