Tags: Coronavirus | homeowners | buyers | flee | housing | market

Homeowners, Buyers Flee Unstable Housing Market

Homeowners, Buyers Flee Unstable Housing Market
(Dennis Connelly/Dreamstime)

By Thursday, 04 June 2020 08:32 AM Current | Bio | Archive

Since the novel coronavirus first came on the scene in November 2019, the pandemic has caused turmoil across the globe — and the United States has certainly not been spared. The virus has infected more than 1.8 million in the U.S. alone, with more than 100,000 deaths.

Effects from COVID-19 have skyrocketed unemployment rates, taxed the healthcare systems and put a strain on our economy. Americans were already deeply in debt prior to the pandemic, but things are now even grimmer.

Clever Real Estate recently launched its COVID-19 Financial Impact Series — starting with a survey at the end of March of 1,000 homeowners and 1,000 renters — to temperature check Americans' financial health.

While the effects were somewhat fresh at that time — the pandemic was just spreading to the U.S. — survey results from the end of April were even more concerning, as some Americans have been out of work for over a month. Clever will continue its survey at the end of every month during and after the lockdown.

For now, let’s look at why homeowners and buyers are currently running from the housing market and how the real estate industry may look in the near future.

Prospective Buyers Are Even More Skittish Than Before

While about 84% of prospective buyers said their plans to buy a home this year were impacted by the coronavirus pandemic last month, almost all were still planning to buy — but maybe looking for bargains or putting off a couple months. This month, nearly 40% of potential buyers said they've stopped their search indefinitely — making them 5.5 times more likely to put a hold on their home buying plans for “the foreseeable future.”

While some of these prospective buyers were those looking to upgrade their home or switch locations, some were renters buying a home for the first time. But, at the end of April, 53% of renters said they're concerned they won't be able to afford to buy a home in the future due to the economic impact of the pandemic. Nearly one quarter of renters who were planning on purchasing a home are delaying due to COVID-19.

Sellers Are Pulling Back Even More

Sellers are on a similar trend as buyers — those surveyed in April were 7.2 times more likely than those in March to have paused their plans to sell indefinitely. One reason for these numbers is that sellers are seeing many states have restricted open-houses and showings. Even though buyers may be allowed in to view a home, many will choose to err on the side of caution and stay home, resulting in a smaller buyer pool for home sellers that do choose to keep their home on the market.

More than half of those surveyed were concerned about the value of their home as a result of the coronavirus pandemic. As they fear reduced profits from the sale of their home, this may also be a reason for sellers to pull their homes off the market or put off selling for the foreseeable future.

Homeowners Are Struggling

A third of homeowners are concerned about their ability to pay their mortgage in the coming months due to the coronavirus pandemic. Along with that, they’re also more concerned than renters about seeing their retirement savings and value of investments drop — probably because they’re 36% more likely to be saving for retirement than renters, and a fifth of homeowners are worried about bankruptcy.

Renters Are Struggling, Too

It’s not just those with monthly mortgages feeling the effects of COVID-19 — renters are even more affected. Nearly 50% of renters were living paycheck to paycheck prior to the pandemic and still are. Despite stimulus checks and unemployment hitting some renter’s bank accounts, many are still waiting or say it’s not enough to keep them afloat.

Renters are 1.4 times more likely than homeowners to have lost their job as a result of COVID-19. Generally, they also have less in savings for an emergency fund. Plus, they’re 37% more concerned about being able to put food on the table and 78% more concerned about paying for housing than homeowners.

More than 40% of respondents said they're currently receiving unemployment benefits. Half said it's not enough to cover their expenses. Roughly 20% of respondents have applied for unemployment benefits, but they haven't received payment yet.

Most who received the stimulus check passed by Congress and approved by the President believe it will be a huge help financially. Those who qualified for the check said they'll use it to pay bills (46%), buy groceries (38%), and pay down debts (23%). However, 64% of renters express concern over being able to pay their rent in the coming months as the pandemic lingers on.

And Thus, Landlords May Be Struggling

Landlords that use renters to cover their mortgage or are over leveraged may see these implications as well. While renters are receiving unemployment benefits and stimulus checks, it may not be enough, depending on how long they are out of work. If you’re a landlord looking to offload some of your properties, consider a discount real estate agent to avoid high commissions and keep more of your cash.

If you’re an investor looking to expand, it may become a good time to find discount properties and you can save even more by looking into home buyer rebates. Over leveraged landlords may be looking to reduce risk in their portfolio by selling some of their properties or unemployed homeowners may be foreclosed on by their lender or looking to avoid it.

If you are filling newly-purchased properties with tenants, make sure you brush up on the latest technology — things like virtual apartment tours and electronic signatures can not only keep both you and potential tenants safe, they can be huge timesavers. You might also consider investing more in your digital marketing skills to attract qualified tenants remotely. Fewer potential tenants want in-person visits, so it’s time for landlords to go online.

Outlook for the Future

There have been few instances in which the future is quite this uncertain. While many states have begun to “reopen,” only time will tell how quickly the economy will recover, how long it will take for the unemployed to find new work, and if the virus will resurface for another wave. Long after the pandemic has passed, Americans will surely feel the incredible toll it has taken on their lives.

Despite record-low interest rates, the housing market isn’t likely to bounce back quickly. Aside from drained bank accounts (and down payments) and uncertainty from American consumers, banks have already tightened requirements for acquiring mortgages and they’re likely to stay in place for some time. Given American’s love of debt and fragile bank accounts, we may see a wave of foreclosures depending on how long people are out of work and how much assistance they receive from federal and state governments.

Beyond the financial impact on the housing industry, we also must consider the emotional side of real estate and the general feeling of unease and uncertainty most Americans are experiencing. Job loss may continue. Social distancing is probably here to stay for some time. And Americans may be leery to make any large purchases or big moves until a vaccine has been developed and successfully implemented. As spring is usually the peak season for home sales, we may begin to see recovery next spring as sellers and buyers who had put off their big move begin to move back to the market.

One thing is for sure: people have adapted to these challenging times by being innovative and flexible. In the world of real estate, agents, buyers, and sellers will continue to adapt how they do business — switching to virtual tours, online notarization, and remote closings. Those who are proactive in creating solutions will come out on top.

Dr. Francesca Ortegren, Ph.D. is a Research Associate at Clever Real Estate where she focuses on helping people understand complex data, real estate, finances, business, and the economy by researching various topics, analyzing data, and reporting useful insights for general consumption.

© 2020 Newsmax Finance. All rights reserved.


   
1Like our page
2Share
DrFrancescaOrtegrenPhD
Since the novel coronavirus first came on the scene in November 2019, the pandemic has caused turmoil across the globe - and the United States has certainly not been spared.
homeowners, buyers, flee, housing, market
1342
2020-32-04
Thursday, 04 June 2020 08:32 AM
Newsmax Media, Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved