The coronavirus has been battering the economy for months. Not only did it cause a stock market crash, but it has also forced millions of Americans out of a job as orders to socially distance have made it impossible for many businesses to safely stay open. In fact, there's talk that the current crisis will spur a full-blown recession that takes the country months, or even years, to recover from.
But what does this mean for the U.S. housing market? Will it suffer a similar fate? Or might it escape COVID-19's impact to some degree?
What we know so far
Though mortgage rates have fluctuated since COVID-19 took hold in the U.S., they're currently at historic lows and could drop even further in the coming weeks. In fact, refinance applications are up in March, with homeowners clamoring to lock in lower rates on their mortgages to lower their costs.
But mortgage rates and home prices are two different beasts, and given the current economic climate, many homeowners may be concerned that their properties will start to drop in value as workers increasingly lose their jobs and spending declines as a whole.
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The reality is that home prices do tend to fall during economic recessions, but the extent to which that happens can vary by local market. In areas of high demand, homeowners may not see their property values go down at all. And with mortgage rates being so low, prospective buyers whose income doesn't take a hit in the coming months may try to capitalize on that opportunity by purchasing property sooner rather than later. Get enough interested buyers, and suddenly, that demand alone can help ensure that should you decide to sell your home, you'll command a decent price for it.
Another thing: Zillow actually did a study on the impact of previous pandemics on housing markets, and one interesting thing it found is that home prices largely held steady or suffered only minor declines. Why? Because during those times, there were fewer transactions, and as such, not that many homeowners who had to sell at a loss.
1686543001 View Live Edit image Authoring TypeImageCredit / Bylinefstop123, Getty ImagesCreated By: Last Updated By: SourceLG E And KUClassificationNot setInitial Publish07/09/19 3:51:46 PM Embargo DateNot embargoedimage: House For Sale With Real Estate Sign In Yard
The housing market could take a negative turn in the coming months. (Photo: fstop123, Getty Images)SEO WarningLayout Priority
Of course, COVID-19 may be an outlier given the drastic impact it's already had on the U.S. and global economy. As such, homeowners should prepare for the possibility that we could see a drop in home values until the dust settles and the economy picks back up. Not only would that leave sellers in a bad spot, but it could prove problematic for property owners eager to tap their home equity in the coming months or years.
But let's not get ahead of ourselves. While the stock market has a tendency to swing wildly, the housing market doesn't tend to be nearly as instantly reactive. As such, now is actually a pretty good time to take a step back and see how things play out. If the current crisis blows over sooner than expected, homeowners may very well emerge from it completely unscathed.
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