Here at Rental Beast, we’ve been doing a lot of reflecting on recent real estate trends, especially regarding the implications that the Novel Coronavirus 2019 (COVID-19) pandemic has on the housing market. As states across the US declare a state of emergency, and stores sell out of basic essentials, its important to remember that panic is not always productive. Instead, let’s be honest about the ways in which this global phenomenon affects, and will continue to affect, the marketplace. As local experts and forever-students of an dynamic industry, it’s important that all real estate agents stay up-to-date on national trends and begin to adjust for the impact that the Coronavirus will have on business! Read up on Coronavirus and the housing market, and see how the market may respond to this global challenge.
What is COVID-19?
COVID-19 needs little introduction. The potentially lethal flu-like respiratory illness was first identified in Wuhan, China in late 2019. Since its genesis, the Coronavirus has has traveled through Asia, Europe, and America at lightning speed. In its wake, it has left over 100,000 infected, 4,000 deaths, a news-cycle dominated by its presence, and a very uncertain global economy.
COVID-19 drives panic, uncertainty
The Coronavirus impacts the American economy tangibly, even with the Fed’s Hail Mary act of slashing of mortgage rates (more on that in one second).
Investor anxiety has sent the stock market into a nosedive and more weeks of tumult are expected as the situation stays in extreme flux. On March 10th, the Wall Street Journal reported that, “The Dow Jones Industrial Average tumbled 1,137 points, or 4.5%. The S&P 500 fell 4.2%, and the Nasdaq Composite lost 3.8%.”
Public health concerns have grounded flights across the nation, caused the cancellation and delay of big-ticket conferences and events (to name a few: E3 2020, Austin’s SXSW, Coachella, and, amazingly, a conference on the Coronavirus), and wrecked damage on parts of the country that rely heavily on global and domestic tourism.
The toll on the global economy could amount to an astronomical figure— UN Trade Officials recently announced that the COVID-19 is likely to cost the global economy $1 trillion.
Mortgage rate cuts buoy a resurgent housing market
In reaction to Coronavirus-induced panic, the Fed have slashed the mortgage rate. The average 30-year fixed-rate mortgage fell to 3.29%, a record low, while the average 15-year mortgage rate approached its lowest ever, at 2.79%. Of course, these record lows make homeownership ever more appealing—especially to first time homebuyers.
Even more good news: The number of building permits issued in January for new single family properties rose to 1,551,000. This is a 9.2% increase from December 2019. This influx of new inventory proves promising for hopeful homebuyers.
Is this a year for one of your renters clients to make the leap into homeownership? You’ll never know if you don’t ask. Employ a great outreach scheme and let renters whose lease is approaching completion that you’re ready to assist them move into another rental, or start searching for a home that matches their lifestyle.
The Housing Market and Coronavirus
Considering this uncertainty and fear, what can we expect from the housing market? The robustness of the current US economy will decrease the toll of the pandemic’s inevitable damage, and the low mortgage rates still promise first time homebuyers a good deal— Coronavirus on not. However, with uncertainty surrounding the virus’ true impact on the global economy, and the human toll growing in the United States, now may not feel like the best time to make an important life move. (Although, many Americans with no prior health issues are taking advantage of record low air travel prices and taking high-risk, high-reward trips across the country.)
This reluctance is reflected in how the American public is taking advantage of new mortgage rates. Mortgage applications shot up 10%, but, refinancing saw a bigger increase. Bankrate reported that refinance applications shot up 26% at the end of February— an increase so large that mortgage lenders are having trouble keeping up.
In Seattle, California and other states deal with high numbers of Corona cases, the prospect of interacting with strangers in an open-house setting has deterred would-be renters and buyers from beginning a new home search.
Still, Amtrak has not ceased service, and most businesses currently recommend enhanced cleaning protocols, not quarantine. If the Coronavirus disappears with warmer temperatures and returns in September, as some scientists suggest, will its presence become an unfortunate fact of public life for the time being?
Will renting be a safe-haven?
With the market environment changing headline to headline, the oft painful and expensive process of moving homes does not appeal to risk-adverse consumers.
“Generally speaking, nobody moves for fun,” says Rental Beast founder and CEO Ishay Grinberg. “Moving is a big financial commitment… and when someone needs to move without a lot of risk, the most natural option for them is to rent.”
While the job market has looked promising, the increase of large companies mandating work from home policies may cut any anticipated long-term confidence.
“It’s risky to buy a property and be locked into specific position for a long time. The flexibility of renting now comes with a much higher premium,” says Grinberg.
Stay safe, real estate agents!
To stay safe, real estate agents can practice common sense health precautions. Take care to follow the advice you’ve read in the news or heard at your brokerage—practice regular hygiene, sanitize and wash your hands often, reconsider travel plans to areas of high risk, and take extra precaution when interacting with large crowds. A history of respiratory issues or regular contact with those who suffer from respiratory issues adds extra risk and demands extra attention to your safety and well being.
Remember— If your clients share their concern over contagion (and, there’s wide discrepancies over individual responses to the coronavirus, so stay sensitive even if your personal risk stays low), let them know that you’d be ready to Skype or text instead of meeting face to face. Luckily the real estate industry is no stranger to new tech. Use what you have at your disposal to keep your client comfortable and ready to make moves on their housing.
We may have more questions than answers, however, we’re keeping an eye on the Coronavirus and the housing market. Continue to consider how you can build a sustainable business! Get ready to capture your share of the 12$ Billion available in leasing commission by working with rentals. To learn more about the Rental Beast platform or to request a no-obligation demo visit Rental Beast for Real Estate Agents