CLEVELAND, Ohio — The novel coronavirus and resulting economic fallout is sure to have some effect on the local housing market, but, with rapidly changing conditions, it’s unclear just what they will be.
As COVID-19 testing capabilities ramp up, more and more cases are being confirmed across the U.S, prompting precautionary public health responses such as Ohio’s ban on mass gatherings and closure of schools. Meanwhile, the stock market has experienced massive fluctuations, earlier this week experiencing its biggest crash since 1987 before rallying Friday on the declaration of a national state of emergency. Mortgage rates rose this week after dropping to their lowest levels on record as investors reacted to the pandemic.
Locally, real-estate professionals say the effects on the housing market have not yet been fully seen, partly because the new reality is just now setting in for many Ohioans. The latest home sale data, from January, pointed to a strong market, but much has changed since then and experts said the typically busy spring season is likely to see some impact.
“I see it just starting to brew here in Cleveland," said Judy Gorbett Darwal, owner of a Re/Max Trinity brokerage in Brecksville and immediate past president of the Akron Cleveland Association of Realtors.
Sellers react
The National Association of Realtors reported this week that, because of coronavirus, nearly 1 in 4 home sellers nationwide are changing how their home is shown to potential buyers.
Sellers are in some cases halting open houses, requiring prospective buyers to wash their hands or use hand sanitizer, or asking buyers to remove their shoes, according to an NAR survey of 2,518 members between March 9 and 10. (NAR oversampled members in Washington state and California because of larger known outbreaks there.)
Locally, real-estate professionals say they are more concerned about reactions from sellers than from buyers, although they have not yet seen many changes.
Howard Hanna Real Estate Services, for example, provided data indicating that home showings this week have been on pace with, or on some days better than, showings from the last two weeks.
Anecdotally, Darwal said she has heard about anxiety among local sellers that buyers may be holding off on purchasing decisions, prompting concerns about keeping homes on the market so long that they lose value.
“We’re seeing this has carried more into seller psychology,” said Joe Rath, Ohio market manager for Redfin. “Sellers are a little bit more worried about whether this is the right timing for them,” in addition to concerns about letting people into their homes.
Real-estate brokerages are adapting by promoting tools such as virtual or video tours of homes to limit in-person showings, although some real-estate professionals acknowledged that buyers may still want to visit a home before making such a significant purchase.
There is some concern that sellers holding off on listing their homes will exacerbate a long-running challenge: There are not enough homes for sale to meet demand from buyers.
Nationally, this does not yet appear to be the reality. Just 3% of respondents to NAR’s survey said homes were removed from the market due to coronavirus.
But it’s something that agents will be watching closely.
“We’ve had challenges with inventory for quite some time,” said Hoby Hanna, president of Howard Hanna Real Estate Services. “This may present a new challenge: If somebody takes advantage of refinancing their house at these low rates, they may take themselves out of the market of even thinking of selling.”
And if the economic consequences of the pandemic lead to a recession, growth in badly needed new-home construction may dampen, he noted.
Buyers still interested
At this point, real-estate professionals don’t seem to believe coronavirus will stymie interest from buyers.
About 16% of respondents to the NAR survey said coronavirus has led to decreased or significantly decreased interest from buyers, but 78% said they had not seen any change in buyer interest. And lower mortgage rates are a more important factor to home buyers than what’s happening with the stock market, according to NAR data.
Homeowners and prospective buyers responded last week to the plunge in mortgage rates caused by investor panic over coronavirus. Mortgage refinance applications soared 79% compared with the week prior, while applications for home purchase loans increased 6%, according to the latest Mortgage Banker Association data. Mortgage rates have since jumped back up, with the 30-year fixed rate back up to 3.65% this week.
Still, even amid uncertainty about how sellers will react or what the longer-term economic effects of the pandemic will be, local real-estate professionals don’t expect a housing market downturn, or for buyers to back down.
“I don’t think that buyer demand is going to go away,” Hanna said.
But, some sources noted, that’s just what they think today. With so much volatility, and so many unknowns, the housing market of tomorrow could be much different than the housing market today.
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Impact of coronavirus on spring housing market still unknown, local real-estate professionals say - cleveland.com
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