What most people don't know that the economy was on the rise before COVID-19 hit. The economy wasn't stable but prevailing. The unemployment rate in the US was an all-time low, the wages rose by 3%, all in all, 2019 ended strong, and the prediction was that 2020 was going to be a good year, but alas! Nature had different ideas.
Around 6.9 million Americans have filed for unemployment benefits in the month of March, and the number has grown during the last two months. Since all businesses are on a halt, people are losing their precious jobs left right and center. No job, no businesses mean unstable economy, and this is just the start of this. It's a new order, a new world, and the only way we can survive this by changing our ways and adapting to the change.
No business is exempted from the effects of the Coronavirus. Apart from the fallen economy, joblessness is a massive concern of the USA. The rise of the unemployment rate and the drop in income, are two huge, correlated issues that the US has to fight in this COVID-19 crisis. It's pretty evident that this is going to affect the real estate and housing market of the US as well. With low income and no support, there will be minimal transaction on the real estate front.
People are scared that they might be reliving the nightmare of the largest housing bubble and crash some ten years earlier than predicted. To know how the market is going to change due to this change and COVID-19 situation keep reading.
The Effect OF Unemployment US Home Sales:
It's not hard to predict the future of many businesses amid the Covid-19 crisis, how will it affect the real estate market in 2020 is a bit hard to predict. Experts have given their verdict, and according to them, the house buying front is going to be slow, pretty slow in fact, as the incomes are being affected by the virus condition in the US. The cost-cutting, people losing their jobs is a significant impact on their regular income; this means that at the moment renting is the right choice.
That's the thing, and it may not be that obvious; buy the job market has a direct effect on the housing market, and since the COVID-19 is making people lose their job and indirectly affecting the housing market.
There are many factors at play here; the first thing is that it's hard to close a deal on selling the house remotely. The party needs to see the house many times before signing the deal; there is the matter of house inspection as well. Repairs, renovation hundred other matters go in play before you close a deal on the house and that can't be done remotely.
Apart from that, there is also the matter of very few buyers and sellers in the market. Think of it this way, people are losing their jobs, and obviously, they are facing difficult times, they aren't going to invest their funds in a house any time soon. Coming to the people who still have stable jobs and incomes, the current situation has scared them as well. It's going to be a while before they feel confident enough to invest in a house rather than have an egg nest ready for unexpected emergencies.
Since there is no demand, the supply is surplus, which means that the prices will go down; the market will not reap much benefit to the seller. And this is the reason they have taken their property off the market. Only those who are in dire need of sale have their property on the market.
According to the recent data accumulation from Redfin, there has been a drop of 150% YOY as many homes have been taken off the listings. This is the most significant drop since the year 2015. The effect of COVID-19 is hard to predict, but it all depends on how long this is going to last and how soon people are going to get their jobs back. The revival of lost jobs also matters a lot. Many experts are of the opinion that the real estate market will rebound as soon as the COVID-19 gets under control, but how soon? When exactly? That is hard to predict, and that still remains the big question.
The Effect OF Unemployment US rental Rates:
As the economy slumps, people with no continued savings will bear the hardest hit of all. Many of these are part of the renting pool in the USA. So how does this affect the rental rates? Well, at the moment, renters are in the most vulnerable position ever. Most of the people who went under the knife and lost their jobs are renters. And these people put more than had of their income in rent and part of their income in savings. So, this clears the picture that it's not only the housing market that is going to get affected because of the virus, but the renters market too will take the fall in 2020.
Landlords and property managers are worries about their rental income and cash flow as their tenants are finding it hard to pay rents. 10% of the tenants didn't pay rent in the month of April, and things would get worse for May.
Unemployment and Home Prices:
Now, how is unemployment going to affect the home prices? This question is again related to all the above predictions. According to the experts, the house prices aren't going to be affected by the COVID-19 situation, not the way it did when the Great Recession hit. During the last recession, there were too many homes on the market; there was a huge supply of homes due to mass foreclosures as well as surplus of construction and mass foreclosures. These causes aren't in play in 2020; hence the experts predict that the prices will not take the plunge.
Things are going to get hard; times are going to get tough before they get better. So, it's essential for all of us to stay vigilant and updated on the current situation.