What Impact Might COVID19 Have On Home Values

Dated: May 5 2020

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What Impact Might COVID-19 Have on Home Values? | MyKCM


              A big challenge facing the housing industry is determining what impact the current pandemic may have on home values. Some buyers are hoping for major price reductions because the health crisis is straining the economy. The price of any item, however, is determined by supply and demand, which is how many items areavailablein relation to how many consumerswant to buythat item. In residential real estate, the measurement used to decipher that ratio is calledmonths supply of inventory. Anormal marketwould have 6-7 months of inventory. Anything over seven months would be considered abuyers’ market, with downward pressure on prices. Anything under six months would indicate asellers’ market, which would put upward pressure on prices. Going into March of this year, the supply stood at three months – a strong seller’s market. While buyer demand has decreased rather dramatically during the pandemic, the number of homes on the market has also decreased. The recently releasedExisting Home Sales Reportfrom theNational Association of Realtors (NAR) revealed we currently have 3.4 months of inventory. This means homes should maintain their value during the pandemic. This information is consistent with the research completed byJohn Burns Real Estate Consulting, which recently reported:

“Historical analysis showed us that pandemics are usually V-shaped (sharp recessions that recover quickly enough to provide little damage to home prices).”

What are the experts saying?

             Here’s a look at what some experts recently reported on the matter:Ivy Zelman, President, Zelman & Associates

“Supported by our analysis of home price dynamics through cycles and other periods of economic and housing disruption, we expect home price appreciation to decelerate from current levels in 2020, though easily remain in positive territory year over year given the beneficial factors of record-low inventories & a historically-low interest rate environment.”

Freddie Mac

“The fiscal stimulus provided by the CARES Act will mute the impact that the economic shock has on house prices. Additionally, forbearance and foreclosure mitigation programs will limit the fire sale contagion effect on house prices. We forecast house prices to fall 0.5 percentage points over the next four quarters. Two forces prevent a collapse in house prices. First, as we indicated in our earlier research report, U.S. housing markets face a large supply deficit. Second, population growth and pent up household formations provide a tailwind to housing demand. Price growth accelerates back towards a long-run trend of between 2 and 3% per year.”

Mark Fleming, Chief Economist, First American

“The housing supply remains at historically low levels, so house price growth is likely to slow, but it’s unlikely to go negative.”

            Even though the economy has been placed on pause, it appears home prices will remain steady throughout the pandemic.

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Sean Henzler

Sean Henzler is a 2nd generation, Island Native with a true love for the Lowcountry. In 2007 he became a property manager for a vacation rental company, acquiring a wealth of real estate knowledge an....

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