As COVID-19 transforms daily routines, people are concerned an economic slowdown, which may affect the housing market, is on the horizon.
Yet many financial and housing experts believe that an economic downturn may not become a recession, according to reports from Realtor.com®. Cautiously, they point to many factors.
“I don’t expect the slowdown to be like the last recession where prices fell,” says Realtor.com Chief Economist Danielle Hale. “There are more than enough buyers out there to keep home sales from slowing in any major way.”
Though in the near-term, home showings may slow due to the need for social distancing, experts currently don’t expect home prices to drop greatly. Mortgage rates are still low and housing supply remains lower than demand, reasons Realtor.com.
When compared to the Great Recession of 2007 to 2009, the current situation benefits from key differences. Then, subprime loans factored in heavily, but today this type of loan is mostly gone from the housing landscape. In addition, home prices have risen significantly in recent years, resulting in home owners building equity that serves as a buffer against the decline of housing prices.
In addition, most housing experts say there is an ongoing shortage of housing, and with the supply of homes for sale continuing to outpace demand, they don’t expect housing prices to drop. One reason for continued demand is the unwavering natural cycle of life changes – expanding family, for example – which often dictates the need to buy a home.
Seller psychology also comes into play. You can expect sellers to be reluctant to accept a lower selling price resulting from a temporary market fluctuation. These sellers will simply put off the sale until prices rebound, notes Realtor.com.
Even so, some markets are likely to feel the downturn more than others, including areas that are focused on travel and tourism.
Also markets that grew quickly could experience a slowdown, says Realtor.com, though experts say the same markets could rebound within a quarter or two as the economy improves.
Help for middle-income borrowers
Many homeowners received a mortgage reprieve when FHFA announced suspension of foreclosures and evictions for at least 60 days for borrowers who can’t make monthly payments on single-family home loans.
This applies to Fannie Mae or Freddie Mac loans, which make up about half of all residential mortgages, or 28 million borrowers. In addition, forbearance of up to 12 months is being granted to homeowners affected by the coronavirus who are struggling to make payments.
Homeowners worried about falling behind on their payments should contact their mortgage provider as soon as possible to make arrangements, say FHFA officials.
If you need to buy or sell a home now, contact a trusted real estate professional for advice. Now more than ever, local market knowledge can help you navigate this changing situation.
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By Tom Kalinski. Tom is the broker/owner of RE/MAX of Boulder, the local residential real estate company he established in 1977. He was inducted into Boulder County’s Business Hall of Fame in 2016 and has a 40-year background in commercial and residential real estate. For questions, e-mail Tom at [email protected],
call 303.441.5620 or visit boulderco.com.