The coronavirus pandemic has affected nearly every aspect of our society. One sector that has not been spared is the housing market. In times of financial hardship, when people can’t pay their bills, the housing market always takes a big hit. This situation, however, is unprecedented, so assessing the long-term impact of the pandemic on the real estate industry is challenging and daunting.
Let’s take a look at some of the effects the coronavirus pandemic will have on the housing market in California.
Interest Rates
According to the California Association of Realtors, mortgage rates have fallen significantly in recent weeks. This provides an opportunity for mortgage holders to save money in the long run by having their interest lowered. For homeowners, any potential negative economic impact will likely be mitigated by the mortgage holder’s long-term benefit of a reduced interest rate. Mortgage providers, on the other hand, may see a decrease in overall profit based on interest.
Luxury Homes
Household wealth has also been significantly impacted during this time. Among other things, this reduction of wealth overall will likely lead to a sharp decrease in demand for luxury homes. On the other hand, the lower interest rates and lower prices in general could make higher-end homes more accessible to those already in the market.
New Home Construction
The construction of new homes will undoubtedly be delayed. With the interruption and complication of international trade, it would be difficult for contractors to get supplies, since most of these supplies come from Asian countries, such as China. This delay will have long lasting effects on house prices as well as the availability of new homes.
Longer Rebound
Unlike the 2002-2004 SARS outbreak, we will certainly see a longer rebound with this crisis. For comparison, it took nearly 6 months for the markets to rebound after the SARS outbreak. What we are seeing with this pandemic is unprecedented as far as the impact on our society goes. There’s no way to tell how long it will take to rebound because we are in untrodden territory. Still, those in the real estate industry should expect recovery to take some time.
It’s all but impossible to see how all of this will play out and what the effects on the housing market in California will be. What is certain though, is that this pandemic will cause a myriad of effects that will linger and change the housing market for quite some time.