The impact of COVID-19 on the housing market: A wake up call to markets.

COVID-19 is going to have a significant impact on the housing market. Global markets are facing significant volatility as we deal with the first major global pandemic that is hitting both developed and developing nations equally. This virus knows no borders and it is surprising how many people are still posting narrowly that this is somehow not going to impact the real estate market. They assume the Federal Reserve is going to have the power to generate demand out of thin air with low interest rates. But to who will you sell? This shock that we are experiencing is a global health crisis and entire nations are fully shutting down to save lives. The Fed has aggressively come out saying they will lower rates but low rates can’t help if you are out of a job or if the economy is shut down because the virus lingers longer than a week or two (by looking at China, South Korea, Italy, and Spain for example we are just starting to enter phase one). The hit to the financial system will be big and here in Los Angeles, the city is in essence slowly shutting down with schools closed, restaurants being limited in service, and grocery stores being cleaned out by panic. Yet somehow this is positive for housing?

The impact of COVID-19 on real estate

If you take a look at the Dow Jones US Real Estate Index the market has already taken a hit:

” alt=”1″ />

This index looks to track the performance of REITs and other companies that directly invest in real estate. Some (not all) may remember vividly the financial crisis of 2007 to 2009. The stock market bottomed out in 2009 but real estate is a lagging indicator to stocks. The market right now is as volatile as I have seen it because major metro areas are shutting down completely. While some small locations have experienced these short-term shutdowns, for example locations near a hurricane that is approaching, we haven’t had something like this. Regarding low rates, we need to understand that during the financial crisis we also had low rates and extreme lending and it still ended up with a big correction because people still need to service debt. With this level of uncertainty right now, many people are not willing to make the biggest purchase of their lives.

Beyond the obvious volatility, people are dealing with a system that is shutting down but not because of a financial crisis. This is a health crisis and all areas are being impacted. Quality of life for the short-term is going to be significantly hit. People are working from home, schools are shutdown, many colleges have gone to strictly online courses to end the academic year. Many Millennials are barely scraping by so this shock from COVID-19 is going to have an impact but it really depends on how long this virus lingers.

Yet people are also realizing that even if you have money, if your local area doesn’t have food stocked, then you are not going to be able to acquire goods even if you have the money. We’ve come to depend on a reliable supply chain but something like this will force businesses to change and people will also remember that the order of things can change so quickly.

This week Los Angeles went from monitoring the status of COVID-19 to shutting down schools and implementing strict restrictions on restaurants, going out, and large gatherings. This is how quickly this is unfolding so open houses are not part of the prescription in social distancing.

People are still in a fog here in Los Angeles. They think it can never happen here or it is always different in this area. That is until it isn’t. This is a health crisis of global proportions. Italy just a few weeks ago was simply “monitoring” the virus to being fully shutdown with strict controls and a healthcare system in severe strain.

To think that “housing only goes up” and forget that real workers need to earn real money and stay healthy, we are in for a correction here. For now, the focus is on getting this thing under control.

Peter is a Real Estate Broker at Professional Brokers Group (License No. 023000), covering the greater Short Sale area of Colorado.
Phone: 720-299-7373
Email Us

Please fill out the contact form below if you wish for Peter to contact you.
[contact-form-7 404 "Not Found"]

Short Sale Realtor short sale realtor    short sale specialist in Short Sale Realtor

Helping Short Sale Realtor home owners avoid foreclosure with a short sale.
Peter Janisch specializes in short sales in Short Sale Realtor. I am your Short Sale Realtor Short Sale Specialist Realtor and Short Sale Realtor loan modification and distressed property expert. This article and content is for general informational purposes and may not be accurate. This should not be taken as legal advice, technical or tax advice under any circumstance. Seek legal advise and representation in all legal matters.