Corona Market Overview: Where is the Market Moving? by Jenny Gonzalez.

Corona Market Overview Where is the market moving?

By Jenny Gonzalez

The impact of Covid 19 was felt in most areas of business, right from the Stock market to the Real estate market. Effects experienced during Covid 19 pandemic are compared to the great recession of 2008 to 2009, when there was an economic and financial downturn. Consequences will be there even in the long term. For instance with stock market part of Romania experienced a downturn while the Europe stock market had positive results. In the real estate market, the number of homes for sale in the market reduced. Real estate was significantly affected due to health issues and lockdown. Likewise, many sellers disliked the idea of inviting strangers into their homes. Work from home orders led many to create office spaces in their places of residence too. Other aspects that led to the decline of homes sold were the fact that many people lost their jobs during the period.

REASONS WHY THE HOUSING MARKET FACED A DOWNTURN

The real estate market decreased sharply in the first few months after Covid 19 was declared a pandemic. Most sellers who already had put their homes on the market delisted them. The high cost of building materials decreased the number of new homes by more than 40%. All these factors led to low inventory levels at the time. Buyers also reduced during the period. It was also evident that online home search was relatively lower than in previous years. Several months later, in an attempt at economic recovery, local authorities issued lower mortgage rates to maintain steady home prices during the pandemic.

WHERE IS THE MARKET HEADING?

The demand for homes increases while supply is low.

At the beginning of August, more home buyers got into the market. Realtors sold more homes, and pending sales increased by over 30%. The sellers allowed buyers to visit their homes to check if their house was in good condition as per the buyer’s qualities. With an increase in the number of buyers and fewer homes available for sale, there was an imbalance between supply and demand. New home listings increased only slightly in the inventories. More sellers become hesitant to sell their homes because of economic uncertainties and fear that one may not afford another. Up to date, there is less supply and more demand for homes.

MORTGAGE RATES

In the last three years, the home market has faced fluctuations with mortgage rates adversely affecting the home buyer’s purchase power. For instance, In March 2020, mortgage rates fell from 3.75% to lower values. Every time an economic stipulation is announced, Mortgage rates increase. An increase in employment also leads to higher mortgage rates. Home buyers, especially those that depend on loans, are affected the most. Higher mortgage rates discourage sellers from the market, as evident in 2018 when mortgage rates increased from 4% to 4.6%, and most people could not afford it. In recent years however low mortgage rates have encouraged more people in the home-buying market.

HOME PRICES

Most homes in the U.S are expensive today, with an increase of more than 10% year over year. The high cost of homes results from low supply and many buyers in the market. Research shows that after the Covid 19 pandemic, the high rate of home price increase had not been experienced since 2006 before the great recession in 2008. San Francisco is among the most expensive places to buy a home in the U.S.A today. There are claims that most homes have been overvalued in the last two years by a 5.5 % increase. An increase in home prices favors the sellers, but for first-time home buyers affording a home becomes a challenge. More than 60% of American households cannot afford a new median-priced home. Recently the cost of building materials has been higher than in the pre-pandemic times. The slow employment rates sometimes discourage some people from buying homes and consequently weaker affordability led to lower sales this year. A great merit of high home prices is the increased equity among the people. Homeowners are classified as house rich; thus, they can remodel the house and add additional features such as offices.

HOUSING SHORTAGE

One of the significant issues that led to the home shortage is the reduced number of new home listings in the market. Such low supply is considered the most inadequate ever experienced in U.S markets. Research also indicates that builders face many challenges today as materials and labor costs are higher. Flight from Urban areas.

After the Covid 19 pandemic, most people are moving from urban areas to the suburbs, which are relatively more affordable. San Francisco is among the cities that had more people vacate. Also, the ability to work remotely led more people to move from smaller homes to larger ones where one can create an office. Younger families with kids prefer to be in a single-family home since there is a backyard for kids to play and even study from home. The need for more single-family homes could be why they have higher prices than townhomes.

The housing market was greatly affected by Coronavirus disease. It is an issue that erupted, and no one had ever thought of it. As a result of the pandemic, real estate experienced overrated home prices, mortgage rate fluctuation, and a low supply of homes which affected most Americans positively and negatively, and the market is still unpredictable.