Recently I have been asked this question several times: What impact is Covid-19 having on home values and what is going to happen in the future? This pandemic is a challenge the real estate market is facing; however, latest statistics and insight from field experts are reassuring.
As you know, prices in residential real estate are regulated by supply and demand.A balanced market would have 6-7 months of inventory. Anything over seven months would be considered a buyers’ market, with downward pressure on prices. Anything under six months would indicate a sellers’ market, which would put upward pressure on prices.
Locally, March and overall first quarter home sales across the Charlotte region were still positive. Specifically in the Lake Norman Region closed sales were up 8% compared to March of 2019 and the average sales price was up 26.6% compared to the same time last year. While buyer demand has decreased during the pandemic, the number of homes on the market has also decreased, with Lake Norman Region inventory down nearly 27% compared to last year and a current home supply of 3 months, compared to 4.5 last year. This is an indication of a strong seller’s market poised for a strong start to the spring selling season and means that homes should maintain their value during the pandemic.
On a national scale, this information is consistent with the research completed by John Burns Real Estate Consulting, which recently reported:
“Historical analysis showed us that pandemics are usually V-shaped (sharp recessions that recover quickly enough to provide little damage to home prices).”
What are the experts saying?
Here’s a look at what some experts recently reported on the matter:
Ivy Zelman, President, Zelman & Associates
“Supported by our analysis of home price dynamics through cycles and other periods of economic and housing disruption, we expect home price appreciation to decelerate from current levels in 2020, though easily remain in positive territory year over year given the beneficial factors of record-low inventories & a historically-low interest rate environment.”
“The fiscal stimulus provided by the CARES Act will mute the impact that the economic shock has on house prices. Additionally, forbearance and foreclosure mitigation programs will limit the fire sale contagion effect on house prices. We forecast house prices to fall 0.5 percentage points over the next four quarters. Two forces prevent a collapse in house prices. First, as we indicated in our earlier research report, U.S. housing markets face a large supply deficit. Second, population growth and pent up household formations provide a tailwind to housing demand. Price growth accelerates back towards a long-run trend of between 2 and 3% per year.”
Mark Fleming, Chief Economist, First American
“The housing supply remains at historically low levels, so house price growth is likely to slow, but it’s unlikely to go negative.”
Even though the economy has been placed on pause, it appears home prices will remain steady throughout the pandemic.
We are changing the way we do real estate. The market is still solid and I am still here to guide you through the process of buying and selling a home in today’s reality. We have new solutions available that will help you move forward with your real estate needs.
If you or anyone you know is thinking about buying or selling, please give me a call. I am here to serve you!