Coronavirus Puts Pressure On the Real Estate Market

Coronavirus Puts Pressure On the Real Estate Market

How coronavirus will affect housing prices is one of the most popular searches on Google. Analysts agree that the epidemic has made prices in the real estate market unstable. At the same time, the owners are in no hurry to sell apartments urgently because of a possible decrease in the solvency of customers. They are waiting for the virus to decline, and the economy will recover.

First of all, difficult times have come for commercial real estate, people are working from home, demand for offices has decreased, hotels are empty, many shops are closed, there are big problems with rent payments, in some cities, rent payments have literally collapsed. Experts believe that this will last at least 18 months.

According to economists, a drop in market activity will lead to the impoverishment of many households, and people simply will not be able to count on purchasing their own housing. Thus, the demand for American residential apartments will begin to decline rapidly, and the growth in the cost of square meters will stall for an indefinite period.

“Aggressive funds” in the US will not lower prices

American housing market analysts in their forecasts rely on the behavior of Internet users. In the USA, the most frequently searched words on Google are “I can’t pay the rent” and “unemployment benefits”.

Given how high housing prices are, its owners have few opportunities to offer tenants milder conditions, since they should be able to cover their large mortgages in order to avoid foreclosure. As a result, the housing rental market chain can quickly break downs.

US real estate funds are the most “aggressive”. If the demand for housing begins to fall, they will not think long and begin to invest in other sectors of the economy. The decision of the US Federal Reserve System (FRS) to lower the key rate allows mortgage funds to refinance themselves and reduce losses due to weakening solvency of customers. However, this measure did not produce the desired effect. Mortgage rates do not fall.

At the same time, as unemployment rises, house prices will be forced to adjust — that is, fall. If the aforementioned requests from Google turn out to be more than a simple warning, and landlords cannot pay to rent apartments, investors may run into big problems.

The real estate market has been, is and will be. Gradually, it will adapt to functioning under quarantine. The main thing is to wash your hands, monitor hygiene and keep calm.

Picture Credit: Unsplash

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