The Effects of COVID-19 on US Real Estate Industry: How to Survive

By
Real Estate Technology with Ph

The Coronavirus or COVID-19 global pandemic has been overwhelming the whole world, with the challenge for every country’s health care system, dropping of stocks, temporary closure of businesses, rising unemployment, and millions of people all over the world mandated to stay at home. Given the rising uncertainty surrounding the situation, specifically in the United States, the housing market is also indisputably experiencing a significant blow caused by the COVID-19 crisis.

To have a better understanding of how the pandemic has changed the environment for all participants in the housing market, read the following impacts of COVID-19 on the US real estate industry:

 

•    Fluctuating Mortgage Interest Rates

With the increasing uncertainty caused by the Coronavirus crisis, the mortgage interest rates started plummeting. In early March, the average rate of the 30-year fixed-rate mortgage dropped to a staggering 3.29%. According to a report on Consumer News and Business Channel, this could even hit as low as zero percent.

Despite the alarming decline in mortgage interest rates, some are surprisingly seeing a positive outcome from it. This is because as the competition has slowed down and as sellers are becoming more nervous, the low interest rates can potentially increase opportunities of locking down a deal.

•    Change in Traditional Real Estate Transactions

As more states mandate travel restrictions, flight cancellations, required quarantine and self-isolation, real estate sellers are placed in an uncharted territory as they struggle to continue their business. Considering that traditional real estate transactions require in-person interactions including open houses and showings, appraisals, inspection, and closings, the set up that sellers and buyers are accustomed to have seen a total change with the crisis. These immediate changes which made it crucial for realtors to seek a new routine that will help keep their business running, is aggravated by the fact that different states have responded with varying levels of restrictive measures.

In New York and California, state officials have explicitly banned all open houses, in-person showings and pitches. This resulted to real estate agents [in New York and California] resorting to virtual showings of properties as they were ordered to conduct business from their homes. On the other hand, real estate has been regarded as essential business in Connecticut, Indiana, Illinois, Ohio, Wisconsin and Hawaii, making it possible for all rental and sales transactions to continue. In other states like Massachusetts, Michigan and Louisiana, the industry’s status is still unknown.

Furthermore, this adjustment in the real estate routine has compromised the ongoing deals before the crisis. Whether the sale is dependent on the buyer seeing the property or due diligence is required before closing a deal, the travel restrictions and required quarantine have potentially delayed or ended an initially ongoing deal.  
 
•    Drop in Buyer’s Interest

According to the National Association of Realtors’ (NAR’s) series of surveys to obtain a better grasp of how the Coronavirus crisis has been affecting consumer behavior in the real estate industry, the real estate buyer interest has dropped significantly. As schools and businesses began their temporary and indefinite closure and as social distancing has been more strictly mandated, nearly half of agents claimed that buyers had become less interested in purchasing residential properties.

With the lockdown in effect in New York City, less than 800 open houses were found scheduled for the weekend which is significantly lower compared to a normal weekend without COVID-19, when there are usually between 5,500 to 6,000 open houses in the city.

•    Declining Seller’s Confidence

As the crisis intensifies in the country with more COVID-19 cases confirmed every day, sellers’ confidence showed a clear decline according to the NAR’s studies. On March 16, the initial data [81%] showing that sellers had kept their homes on the market dropped by 20%. Additionally, 16% of agents mentioned that sellers had decided to pull their homes from the market, resulting to a 13% increase from March 9.

Based on the data gathered by Fritz Frigan, executive director of sales and leasing for Halstead Real Estate in New York City, 4,454 properties were taken off the market on the month of March which literally tripled from the 1,778 properties in January. For sellers who have kept their homes on the market, approximately 60% of the realtors included in NAR’s March 16 survey claimed that they had taken extra precautions when showing their homes such as cancelling open houses, restricting the number of showings, and requiring buyers to remove their shoes and sanitize or wash their hand upon entrance.


Despite these alarming impacts that have caused the US real estate industry to slow down and the possibility for more adverse effects on the market, there are a few things that can be done to survive in the housing market.

•    Keep adapting

As the situation is constantly changing and is likely to intensify in the following weeks, it is necessary to adapt accordingly. If the state you live in mandates work-from-home business, conduct virtual showings; if in-person interactions are still allowed in your state then you can proceed with your usual business routines with great caution so as not to compromise your health, as well as your potential buyers’ health.

•    Make informed judgments

Considering that this crisis has put everyone in an unknown field, it is best to stay informed with the latest updates on the crisis and the trends in the real estate industry. With timely and relevant information, you can make judgments that are good for your business and your potential buyers.

•    Do not panic

As everyone is caught with surprise due to the COVID-19 crisis, it is very crucial for all of us to stay calm and not panic as the country and the rest of the world combat this pandemic. Keep your loved ones and yourself safe, and do what you can to keep your business alive and running. We will survive and get past this crisis.


Sources:
https://homeownershipmatters.realtor/issues/how-covid-19-could-impact-the-real-estate-market/
https://www.quickenloans.com/learn/coronavirus-affecting-housing-market
https://www.fox43.com/article/news/health/coronavirus/real-estate-industry-feels-impact-of-covid-19/521-c9b99730-bc48-43e5-bc95-4c9e31ead051
https://www.nar.realtor/coronavirus-a-guide-for-realtors
https://www.lvb.com/covid-19-sharp-impact-real-estate-market/    
https://www.fox10phoenix.com/news/real-estate-companies-feel-impact-of-covid-19-on-the-housing-market
https://www.jll.com.ph/en/trends-and-insights/research/covid-19-global-real-estate-implications

 

Comments (3)

Joseph Doohan
Joseph Doohan - Las Vegas, NV
I offer business strategy advice for realtors

Thank you for taking the time to keep us posted and up to date. Wishing you a great day ahead! Take care.

Apr 03, 2020 01:22 AM
Rachelle Moore

Thank you Joseph Doohan ! Take care too

Apr 03, 2020 08:15 PM
Will Hamm
Hamm Homes - Aurora, CO
"Where There's a Will, There's a Way!"

Hello Rachelle,  Good job with your blog on this subject.  Buyers are waiting not to get out and sellers want to sell but do not want people in their homes.

 

Apr 06, 2020 09:44 AM
Rachelle Moore
Ph - Seattle, WA
Real Estate Media | Photo Editor | Blogger

Hi Will Hamm , I agree! glad you enjoyed it. Keep safe, Will wit your fam!

Apr 06, 2020 10:16 PM