In a few short weeks, the COVID-19 virus has wreaked havoc on nearly every facet of American life.
But it’s not all disastrous news. For now, the housing market is proving more resistant to the pandemic than other sectors of the economy.
“What’s happening right now is very different than during the [Great Recession] of 2007, because the underlying fundamentals of the economy were weak and there was a huge insolvency with the banks,” says Esther Phillips, a senior VP at of Key Mortgage Services. “But in this case, the fundamentals of the economy were good until very recently.”
Many realtors say buyers and sellers aren’t yet panicking about COVID-19 in large numbers. That’s consistent with data from a March 10 survey by the National Association of Realtors, which asked members how the outbreak has impacted market behavior. Nearly 80 percent of realtors cited no change in their clients’ interest, and 87 percent said the virus had not affected the number of homes on the market.
The effects of COVID-19 were more severe in states with a larger number of cases. For example, five percent of realtors in Washington State said homes had been removed from the market since the outbreak, compared with three percent nationwide.
In Illinois, which has logged 422 reported cases of COVID-19 as of Friday morning, market activity has been about average for the season, according to several local brokers. In Chicago, property sales were up 2.3 percent in Feburary compared to the same period last year, and the median sales price was up 6.4 percent.
Data for March isn’t yet available — and the outbreak has only just begun to paralyze the global economy — but at least anecdotally, home sales are still closing. “It’s slowing down a little bit, but the market isn’t showing significant signs of change," says Maurice Hampton, president of the Chicago Association of Realtors and CEO of Centered International Realty Corp.
Phillips has observed the same thing. “Certainly there are people who are freaking out right now and taking their homes off the market, but there’s another camp that’s the opposite — they’re full-steam ahead and they’re not letting this thing stop them.”
Much of the excitment stems from the Fed’s move last week to slash interest rates to zero. But Hampton says that’s fool’s gold for homebuyers, because there’s little indication that mortgage interest rates will follow suit.
“My own mother thought we suddenly had zero percent mortgage rates,” says Hampton. “I had to tell her that it’s only true in theory.”
In the first week of March, the interest rate on 30-year fixed mortgages hit a 50-year low of 3.29 percent, according to bankrate.com. However, it’s since shot up to 4 percent — the highest rate since January — thanks to a surge in applications for refinancing. Still, if rates stay below 5 percent, some investors may withdraw funds from the sluggish stock market and put them into real estate.
Arguably the biggest challenge to realtors has been social distancing. In the age of the mass quarantine, some open houses are requiring visitors to sanitize their hands, and others are getting cancelled altogether.
“We’re seeing more video tours, though I think that’s more on the rental side of things,” says Ben Creamer, cofounder and managing broker for Downtown Apartment Company and Downtown Realty Company. “I think people that buy want to see a place in person still.”
But even that may soon change.
“It’s hard to say anything for certain right now,” says Creamer. “We’re in unprecedented times and it’s all evolving very fast. A lot of us are taking a wait-and-see approach.”