Due to the unexpected spread of the Coronavirus, practically everyone has had to adjust their lives. Some people are fortunate to be able to work from home. Students are being home schooled because schools and colleges are closed. Many businesses have closed their doors, putting employees out of work unexpectedly.
People working in certain professions such as nurses, doctors, and healthcare personnel are the heroes fighting this viral epidemic. Personally, I want to thank them for their unselfish service.
All of this has created concern about where the economy is headed. How will COVID-19 affect real estate? Will there be another recession sparking a housing crash like the one experienced in the early 2000’s?
I became a Realtor® in 2011, just when the market started coming back. Real estate was challenging even then, but we’ve come a long way.
For those who went through that recession, the feelings of déjà vu are understandable. No one knows how we are going to emerge from this. Time will tell, so there’s no need to be unduly worried for now.
Here are a few reasons why this time may not be like the last time.
Home prices aren’t out of control
It’s great that home equity has rebounded in most all markets. There hasn’t been a major jump in real estate prices. Although the Feds lowered interest rates to zero, as of this writing it hasn’t affected mortgage interest rates. This graph from from Keeping Current Matters shows the difference in annual home price appreciation then and now.
We have a shortage, not a surplus of homes on the market
As the following graph from Keeping Current Matters shows, there were such a large number of homes available for sale in 2007. Today, we’re short on housing inventory.
Mortgages aren’t like they were
During the early 2000’s, it was very easy to get a mortgage. Lots of loans were issued to people who were credit and income challenged. When the government began raising interest rates, borrowers found themselves unable to pay their mortgages. Today, mortgage qualifications have changed and the type of loans that got many homeowners into trouble are no more.
MORE Homeowners HAVE EQUITY
In the 2000’s homeowners were using their property as a personal ATM machine. Home prices have risen nicely over the last few years. Homeowners have taken advantage of lower interest rates, but not taking equity from their homes.
What this all means
No one knows for now, but we may see in time an increase of short sales and foreclosures due to the economic changes brought on by COVID-19.
Here are the real estate Virginia Beach stats from REIN MLS from February 1st through March 20th .
907 Active Homes For Sale
659 Pending Sales
891 Homes Sold
As you can see, homes are being still listed and properties are going under contract. Using technology to conduct real estate virtually may end up becoming the way real estate is bought and sold. However, this still is a business where real estate agents are still are and will continue to be a valuable resource for home buyers and sellers.
In the meantime, the times we’re living in call on us to be the best we can be. Let’s focus on being kind, neighborly, and helping one another get through this.
In the meantime, learning what it takes to buy or sell a home will give you an edge. Download your FREE Buyer or Sellers guide.