What Will Happen to Housing Prices When the Economy Reopens?
If you are like most real estate investors right now, you are worrying about keeping your family safe and keeping your business afloat (and hopefully profitable) during the coronavirus pandemic and the national economic shut-down. However, as some markets report successfully “flattening” the infection curve and some states, like Georgia, are already taking initial steps to reopen, investors are starting to wonder what will happen to housing prices when the current state of stasis ends.
There are three schools of thought when it comes to how the “end” of the pandemic will affect housing prices this summer and fall:
Extreme Optimism Gives Us a Vaccine and a Bounce
The most optimistic analysts and investors say they expect the “end” of the coronavirus to come in the form of a treatment, a vaccine, or both. Furthermore, they expect these things to emerge sometime this summer, leaving plenty of time to get things under control before the speculated “second wave” occurs in Fall 2020 or Winter 2021. These optimists predict that exuberant homebuyers will rush out into the market, spending wildly to get homes under contract and get moved before the start of the 2020-2021 school year. In this extremely positive scenario, we could end up with another substantial stretch of housing price appreciation starting in May or June of this year.
Cautious Optimism Gives Us a “Re-Start” When We Reopen
For investors and analysts who are not quite so “Pollyannaish,” cautious optimism does not provide a bad option either. More temperate predictions say that home prices will have “frozen” in place when the economy shut down and will “re-start,” much like we hope the economy will, when things reopen. In this scenario, home prices might not shoot skyward, but prices should remain steady although housing inventory will likely rise and financially stressed owners ultimately sell or go into foreclosure.
Worst-Case Scenario Says All Bets are Off
In a worst-case scenario, nothing goes well for the housing market this summer and fall. The most pessimistic analysts warn that the massive economic upheaval and extremely high unemployment the nation has experienced over the past few months will essentially “change all the rules” as far as housing is concerned. Between foreclosures, evictions, and extremely stringent lending, these pessimistic individuals say the entire economy could collapse…and take the housing market right along with it.
At Strategic Passive Investments, we expect housing markets to react the way they always do: regionally. Areas that are not hit as hard by the pandemic or that successfully reopen their economies will have stronger housing recoveries than those that delay or have to backtrack. We are closely monitoring our markets and continue to do business actively in every state where we are permitted to do so and we hold property.