How to manage the Market during and after COVID-19
All we hear on the news is these stories.
There is no doubt, we will look back on 2020 as the year that things got very bizarre We’ll remember the people who succumbed to this virus and we will also celebrate the heroes; nurses, doctors, the frontline responders, EMT’s, Police and Firefighters. We will look back and remember how we saluted the truck drivers and grocery store workers who put themselves in harm’s way, every day, to make sure that we had the basic necessities to get by. And we’ll remember the great rush to grab up as much toilet paper as you could fit in your shopping cart!
The New Normal...
Things will be different. How will we socialize?
Restaurants, schools, businesses, churches, parks and more will reopen, but people may shy away from crowds for a while. In our house, we’ll probably still be wiping down groceries with disinfectant wipes.
The idea of traditional office space and telework may become the norm in businesses around the country or even the world.
How will this impact housing in New Jersey?
2019, saw more homes sold in the Garden State than ANY other year. As strong market was continuing as the first 2 months of 2020 saw more homes sold in January and February, 14% more than in January and February of 2019. We don’t have a lot of data to look at yet, but the second half of March saw contract sales slowing down almost 15% compared to 2019 and almost 29% lower than in February.
It looks like we’re going to be in for a bumpy roller coaster ride.
With things still in lock-down, the predictions for April are that there could be 70-90% fewer homes sold in this month compared to April of 2019! Simply put, that is a HUGE drop. It appears that buyers are wary to purchase a home based on just a virtual tour or online photos.
So, how long will the decline last? This depends on when the peak in coronavirus infections occurs. Suppose that infections peak in April, the economy could open up around Memorial Day. But, if infections don’t peak until after Memorial day, we may have to wait until early or even late July for business to begin again.
The good news is that once businesses open again, home sales are expected return to 2019 levels after about 6 weeks – in July and August in the best case scenario.
Sales should increase sharply by September with the increase slowing slightly through the end of the year. In this scenario the Spring market will take place starting in September and continuing through the end of the year.
In the worst-case scenario April will see a 90% decrease in homes sold. It’s not all bad, however. Sluggish improvement will occur, with the year-over-year sales down around 50% in August and around 25% in September. Sales could level off in October and match 2019 numbers for the last 3 months of the year. Based on this model, there will not be a 2020 Spring Market.
Home Prices Moving Forward
Regardless of when the peak of infections hit, there will be fewer homes sold this year compared to last year. What will happen to home prices? This article has all the information.
Some more good news is that mortgage rates are at historic lows now and predictions are that they could fall to the low 3’s or even as low as 2.9% for a 30-year fixed mortgage.
If you’re thinking about buying a home, now is a GREAT time as interest rates are low and prices may be falling, so you will be able to purchase a bit more home for your money. For every percentage point that interest rates drop, the price you can afford increases by 9%. If interest rates were at 4% and you could afford a $400,000 home, that if rates are at 3% you can now buy a home worth $436,000 and your monthly payment will be the same in both situations.
Questions? Need to know more?
Contact TeamZuhl today and we’ll help you. You can reach us at WayneZuhl.com, TeamZuhl@gmail.com or by phone at 908-917-4189.
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