Will history repeat itself?
While the ever-growing coronavirus outbreak is certainly no good news, it appears there may be a silver lining to look forward to — at least for hopeful homebuyers. According to a new analysis of past pandemics, history says they’ll likely see significantly reduced competition and potentially lower home prices due to the virus.
Past pandemic trends to watch for
A new analysis from Zillow looked at the economic impact past SARS and flu pandemics had on economies worldwide, and a few trends emerged.
For one, competition waned significantly. In most cases analyzed, real estate transactions saw a steep decline. Studies from the 2003 SARS pandemic in Hong Kong show sales were down anywhere from 33% to 72% each month.
According to Svenja Gudell, Zillow’s chief economist, this drop was due to customers wanting to avoid human contact. “After the epidemic was over, transactions snapped back to normal volumes,” Gudell said.
Home prices also fell 1.6% to 1.9% in Hong Kong during the SARS episode.
Current coronavirus impacts in China
China has been dealing with the current coronavirus outbreak since late 2019. In that time, overall real estate transactions have “nearly ceased due to avoidance behavior,” Gudell says.
In fact, according to data reported by Marketwatch, transaction volume has dropped between 90 to 98% since the coronavirus reared its head. The impact on home prices hasn’t been as clear, though data does show they were stable — at least from December to January.
Still, the state of the pandemic is constantly in flux, and its impact on real estate and home prices — both abroad and here in the U.S. — won’t be fully known for some time.
“It is difficult to precisely forecast the probability of an epidemic-related downturn and how such a downturn could provoke a standard recession,” Gudell says, “because this depends on how COVID-19 progresses and how this progress interacts with preexisting recession risks and policy responses — ranging from doing nothing to shutting down entire cities for months at a time.”
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The coronavirus’ impact on home prices may not be clear yet, but its impact on rate is. Concern surrounding the outbreak caused mortgage rates to reach historic lows earlier this month. Shop around and see what mortgage rates you qualify for today.