The coronavirus pandemic hit America just as the spring home sales market was beginning. The inventory shortages that have plagued real estate markets for several years returned in force, helping to push annual home price appreciation to 4.5% by mid-March.
The devastating pandemic, which would grow to become one of the worst in the nation’s history within three months, brought real estate markets to a halt. Social distancing rules prevented buyers from touring homes for sale, and appraisers could not inspect interiors to make the accurate appraisals lenders needed to approve mortgages. Closings were conducted in cars or virtually. Buyers’ contracts included “coronavirus clauses” that give either party the power to cancel for any cause related to the pandemic.
Open houses were put on hold, and some sellers pulled their listings off the market at the very height of the spring season. The plunge in inventories that resulted came at the time of the year when supplies traditionally are at their annual peaks and most homes are sold.
The four to six weeks it typically takes real estate transactions to move from contract to closing is one reason that housing markets move much slower than securities of commodities. Individual properties rarely change direction more than once in 18 months, and real estate market data are almost always reported on a monthly basis.
Natural disasters like floods and fires bring local real estate markets to a halt, but the pandemic is the first crisis to bring markets across the nation to their knees. Even the expert economists weren’t sure what would happen. The decline in listings set off the first alarms, and many thought sales and prices would quickly follow.
Prices Rose Slightly in These Cities
To the surprise of many, prices hardly fell at all. The pandemic did slow their appreciation, but during March and April, prices continued to steadily rise slightly in many markets, if not, remained similar to their pre-virus pricing.
One reason is that prices captured in March reports were from transactions negotiated weeks before shelter-in-place orders. Even April home prices reflected sales in the first half of March, before the first shelter-in-place orders. Price changes in late March weren’t reported until May. By then, the shrinking of supplies and the restoration of demand from buyers looking for bargains kept prices steady.
CoreLogic reported that home prices held up surprisingly well in many metro areas. These include Phoenix, Arizona with an 8.3% year-over-year growth in May, Las Vegas, Nevada with a projected 5.1% year-over-year growth and Denver, Colorado which has a projected year-over-year 4.1% growth in May. Prices also held up well in Seattle (6.2%), Portland (4.0%), Tampa (7.3%), and Miami (4.8%),
The real estate analytics firm predicts Phoenix, Tampa, Seattle, Las Vegas, Cambridge, Miami, Atlanta, Denver, Portland and Nassau-Suffolk Counties in New York will end the year with prices rising faster than they were before the pandemic hit.
What Will the Rest of the Year Bring?
The next unknown is the timing and extent of the impact of the widespread unemployment on real estate sales. Will beleaguered families be forced to sell their homes? Some four million homeowners have asked their lenders for a grace period of six months before they pay their mortgages. How many of these will not be able to make both their regular payment and repay the mortgage payments they missed when their forbearance periods end? Will home values sink when thousands of these homes end up foreclosure as they did from 2009 to 2011 during the Great Recession?