Since early March, the COVID-19 pandemic has been making a substantial financial impact on millions of people across the country. With 22 million jobless claims in just one month and a slowly moving economy, many homeowners are left wondering if their properties will see a decline in value as workers continue to lose their jobs and minimize personal spending. Spring is traditionally the prime time for buying and selling homes, but thanks to COVID-19, listings have dropped significantly.
What We Already Know
Beginning in March, mortgage rates have fluctuated significantly. They’ve fallen to record lows—the average for a new 30-year fixed-rate mortgage currently falls near 3.33% – and may continue to drop. For those who already own homes, applications to refinance their homes are up almost 168% from March 2019.
Mortgage rates and home values, while related, are two separate entities. History shows us that home prices are likely to fall during recessions, but to what degree is specific to your local market. If available homes in a particular area are already highly sought-after (places like San Francisco, Los Angeles, or Seattle), it is unlikely homeowners will see their property values go down much at all. That said, with such low mortgage rates available, buyers who haven’t suffered from layoffs or unemployment could find their opportunity to purchase a property. If there is still a demand for homes in an area, home prices are likely to remain steady.
Past research from Zillow shows us that during previous pandemics in the US that home prices remained stable with only small declines in home prices. The research also showed that there were fewer real estate transactions and NOT sales happening at a loss.
COVID-19 is already an oddity, and its impact cannot be denied around the world. With that, all homeowners with interest in selling should be prepared for the likelihood of home values dropping until this pandemic passes and the economy settles. While a drop in home values could leave sellers in a challenging situation, it’s also not ideal for anyone who may be looking to draw upon their home equity in the not-so-distant future.
While so much of our lives remain up in the air, and while the economy is so unsettled, this is an opportunity to pull back and see what happens. If the panic around COVID-19 dies down sooner than anticipated, buyers and sellers may not even notice a change in the market.