How is the 2020 Economic Climate Affecting the Housing Market?

How is the 2020 Economic Climate Affecting the Housing Market?
  • Opening Intro -

    The economy was humming along in January and February 2020, which are traditionally slower months of the year for the real estate market.

    However, COVID-19 related closures, stay-at-home orders, and significant job losses in all sectors of the economy hit the market hard in March.

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Buyers, sellers, investors, and others with an interest in the housing market should consider these five ways that the 2020 economic climate is affecting real estate.

Economic Issues Affecting the Housing Market

Governors, directors of health, and mayors have issued a variety of emergency orders. In those orders, the required businesses to shut their doors. Non-essential businesses have been closed in almost every state in the USA.

Small businesses, restaurants, and large corporations alike have laid off their workers. State unemployment agencies are overwhelmed, leading to a backlog of claims. Many people are having a difficult time filing online unemployment claims or getting a representative on the phone.

For people who have not lost their jobs, they may be worried about a job loss or a pay cut. The economic fallout of the COVID-19 pandemic is not yet complete.

Even as some states prepare to slowly reopen businesses around May 1, the repercussions will continue through every sector of the economy.

Stay-at-home Orders Affecting Real Estate Sales

With stay-at-home orders in most states and other states suggesting that residents stay at home when possible, fewer people are going to open houses.

The risk of infection from COVID-19 has also caused many homeowners and real estate agents to cancel open houses and in-person tours of homes for sale.

The housing market had already been trending to more virtual tours and online offers, and this is expected to increase. The use of technology will be critical to completing Logan, Utah, real estate transactions throughout 2020 and in the future.

Projected Second Quarter Sales for 2020

A person who had already been saving for a down payment or thinking about buying a home may decide that it is too risky right now. According to CNBC, home sales are expected to fall by 35 percent in the second quarter of 2020 compared to 2019.

About 4 million housing units will be sold in 2020. The prediction had been sales of around 6.1 million housing units for 2020.

For the next three months, home sales that were already in process should finish, but they may finish more slowly. For the rest of 2020, there may be fewer homes listed for sale and fewer people looking to buy.

Effects of the Government Response to the COVID-19 Pandemic on Housing

The response of the federal government and state governments on the COVID-19 pandemic will play a big role in the housing market. Passing more economic stimulus packages for consumers and small businesses could provide people with better cash flow. Extension of unemployment benefits may also help.

States that slowly lift their shelter-in-place orders and allow businesses to open in a responsible manner could give consumer confidence a boost. When people are able to get back to work and off of unemployment, they will have more confidence in their economic future.

A higher level of confidence will make people more likely to purchase a home. The availability of a COVID-19 vaccine will also play a role in opening the economy and boosting the confidence of buyers.

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Housing Market Predictions for 2021

Economists are hesitant to make predictions about the 2021 housing market because there are so many unknowns. Health experts predict a second wave of COVID-19 infections to coincide with the 2020-21 influenza season.

If the infections wane over the summer, states could restore some economic activity and have more time to prepare in case a second wave does come. Overall, economists expect 2021 sales to be higher than 2020s, rising to a level of about 6.1 million units.

Consumers are understandably worried about their financial futures. People who have recently been laid off, furloughed or given pay cuts may have to hold off on their plans to buy.

The recovery could take a while, and it depends on the availability of a COVID-19 vaccine and many other factors. Keep in mind that different areas of the country have different levels of real estate demand, so recovery could happen faster in some areas.

Image Credit: housing market by twenty20.com

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