How Is the Coronavirus Impacting Real Estate Sales?

By
Real Estate Broker/Owner with Bend Premier Real Estate 200009031

Will Coronavirus Change the Real Estate Market?

With the outbreak of the coronavirus worldwide, which has sickened thousands and created panic and uncertainty in our stock market, we are left to question if the effects will extend to the US real estate market, and more specifically to our local Central Oregon real estate market.

Coronavirus Pushes Down Interest Rates

Coronavirus Impacting Stock Market

Mortgage Interest Rates have already fallen to new record lows (3.29% as of March 5th) as investors are taking money out of the volatile stock market and putting it into safer US Treasury Bonds. Historically, when bonds are strong, mortgage rates go down.

Although record low rates are bound to get some home buyers off the fence to take advantage of their greater buying power, if this volatility and uncertainty are prolonged, worries of a recession and retirement fund levels could drag down the housing market regardless of these historically low rates of financing.

According to Realtor.com® Chief Economist Danielle Hale, “If the stock market is flashing a sign that an economic slowdown is on the way, that’s when Main Street will feel it. And it could lead to a slowdown in sales.”

The Luxury Real Estate Market Could be Vulnerable

Bend Luxury Real Estate Sign

One needs only look back to the recent recession to remember how vulnerable the luxury market is to stock market drops. The reason for this is the same buyers who can afford a 1+million dollar home are the same ones with more money invested in stocks. Thus they are also the people most vulnerable.

According to Ali Wolf, Director of Economic Research at the Meyers Group, “If the stock market continues to fall, there’s going to be a lot of luxury homes for sale and not a lot of buyers looking for them.”

What’s the Future for Real Estate?

Typically lower interest rates mean lower mortgage payments which seem to have given recent home sales a boost. Rates recently ticked down to a record low of 3.29% on a 30-year mortgage as of March 5th, according to Freddie Mac.

“Buyers right now are trying to juggle whether or not they should jump in when mortgage rates are this low,” says Wolf of Meyer Research. “What looks like a home that’s out of reach may actually be very affordable on a monthly payment schedule.”

“We may see a bit of a boost in home sales in the short term,” according to Chief Economist Danielle Hale from Realtor.com®, “But depending upon what happens, it’s possible we could see a slowdown later in the Spring.”

Where do we go from here with Bend Oregon Real Estate Sales?

Coronavirus Impacts Real Estate

The stock market correction of 10+% was inevitable as coronavirus fears caused people to pull money out of stocks and put their money into safer bonds. And the stock market responded not just to the virus itself, but also to the economic impacts of those countries most affected including the world’s #1 exporter China, along with South Korea, Italy, and Iran. It will take a while to get the global economy working well in sync again.

However, there is one more aspect that comes into play here that is not being talked about much due to the panic and all the media attention associated with the virus. That is our nationwide housing shortage. Freddie Mac put out a report on March 2nd that got overlooked indicating a nationwide housing shortage of 3 million units. According to this report Oregon is the most under-supplied state, followed by Colorado, Florida, and California.

Bend has been one of the most impacted areas of Oregon due to strong immigration along with decreased levels of construction by builders who are still cautious from being hit so hard during the recession, along with lack of land and a shortage of sub-contractors. The Chief Economist from of the National Association of Realtors, Lawrence Yun, indirectly spoke to Bend’s building shortage when he commented “Many small-time builders are still out of the game. It was small-time builders in the aggregate that built many more homes than the big builders, and they’ve hesitated to get back in, even though it appears there is a money-making opportunity.”

As a result, Bend continues to have historically low inventory of new homes for sale, currently hovering at only a 2 month supply. The result of this low supply, along with high demand from people moving to Bend, has led to sharply increasing home prices year-over-year since coming out of the recession; the average active home price in bend now is at a record breaking $771,000.*

So while we will likely see a softening in home prices, especially in the luxury home market, we still have a strong demand for homes and very low supply and the economy is in perhaps the best position in the last 40 years to get through an event like the coronavirus. And though this event is being treated seriously with our government just approving 8.3 billion dollars to combat the coronavirus, there is still uncertainty as to the overall long term impacts that are certain to lead to a bumpy road ahead for both the stock and the housing markets.

 Sources: Realtor.com® Trends: Corona Fears are Driving Down the Stock Market. How About the Housing Market? February 28, 2020.

Keeping Current Matters. Impact of the Coronavirus on the US Housing Market. March 5, 2020.

Realtor.com® Trends: US Real Estate Market Shows Symptoms of Coronavirus Effect: What You Need to Know.

HW: U.S. housing market is missing 3.3 million homes, Freddie Mac says. March 2, 2020.

*Data from Central Oregon Multiple Listing Service 3-7-2020.  Original blog can be read at Bend Premier Real Estate's blog.

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Rainer
204,433
Don Baker
Lane Realty - Eatonton, GA

I do not believe COVID 19 had anything to do with mortgage interest rates, nor does my loan officer.  The stock market, yes, the lack of people at work in China, yes.  

Mar 08, 2020 01:45 PM #1
Rainmaker
453,353
Lynnea Miller
Bend Premier Real Estate - Bend, OR
Premier Real Estate Service in Central Oregon

Thanks for your thoughts, Don Baker .  Mortgage interest rates, although not tied to the fed, do tend to follow the trends of the 10 year treasury bond which is at a record low. Economists believe this bond will stay around 1% due to fears of the coronavirus. Incidently, the bank prime lending rate also fell to 4.25% after the fed cut and we see many predictions that 30 year mortgage rates are headed down to about 3%.

Mar 08, 2020 03:12 PM #2
Rainmaker
5,779,837
Roy Kelley
Realty Group Referrals - Gaithersburg, MD

Smart consumers are trying to protect their health and are anxious to take advantage of the very attractive mortgage interest rates.

Mar 09, 2020 05:06 AM #3
Rainmaker
453,353
Lynnea Miller
Bend Premier Real Estate - Bend, OR
Premier Real Estate Service in Central Oregon

Hi Roy Kelley . Thanks for checking in on my blog. Yes- this reduction in interest rates could trigger a lot of refinancing of existing home loans.

Mar 09, 2020 06:51 AM #4
Rainmaker
5,779,837
Roy Kelley
Realty Group Referrals - Gaithersburg, MD

The spread of the Coronavirus may lead to some home sellers to ask of release of their listing to prevent people from entering their home. 

Mar 09, 2020 06:54 AM #5
Rainmaker
3,410,321
Will Hamm
Hamm Homes - Aurora, CO
"Where There's a Will, There's a Way!"

Hello Lynnea,  I have to say I had two new first time buyers call me on Saturday because of interest rates being so low on a news report.

 

Mar 09, 2020 08:59 AM #6
Rainmaker
453,353
Lynnea Miller
Bend Premier Real Estate - Bend, OR
Premier Real Estate Service in Central Oregon

Hi Will Hamm . As we always see, with every negative there seems to be a potential positive that can result. Hope you get those buyers in contract with these great new interest rates.

Mar 09, 2020 01:05 PM #7
Rainmaker
1,823,814
Lise Howe
Keller Williams Capital Properties - Washington, DC
Assoc. Broker in DC, MD, VA and attorney in DC

Every day brings a new twist and a new challenge - whatever we think we know today will be turned upside down tomorrow 

Mar 18, 2020 06:27 PM #8
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Lynnea Miller

Premier Real Estate Service in Central Oregon
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