As we continue to experience a Nation Wide State of Uncertainty regarding the longevity and severity of COVID-19 many friends, family, forever clients & professionals are asking themselves – “How Will This Impact The Housing Market?”
As a Real Estate Professional, I tend to hear the uncomfortable undertone – “Is COVID Going To Cause A Housing Crash?”
The answer is simple. Yes…well…maybe…actually…probably not. Simple. Right?
WHAT’S HAPPENING NOW – Prior to this tragic pandemic, the Wisconsin and National housing market was experiencing a challenge of limited inventory and high buyer demand resulting in year over year home value appreciation. When COVID hit, it poured the proverbial “gasoline on the fire.”
Many sellers withdrew active listings and many more who were previously planning on listing their properties for sale held back due to various concerns or fears. A shortage of inventory quickly became a housing draught in many markets. Coupled with historically low interest rates, hovering around or even below 3%, lack of supply and high demand continues to be the current challenge in MOST housing markets.
Although COVID has caused an unprecedented increase in unemployment, the majority of industries impacted – (Hospitality, Restaurant, Bar, Retail, etc.) – and age ranges affected – (18 to 25) – has not resulted in a drastic reduction of home buyer demand. This limited supply and high demand could very well continue in spite of prolonged COVID Spikes and/or challenges.
WHAT DOES THE FUTURE HOLD – Although most economists and housing experts – including Zillow, Corelogic, Zellman, & Freddie Mac – are predicting continued increases in home values, as well as a generally healthy housing market, there are some serious concerns that we must recognize and prepare for.
- One – If we do not find solutions for the unemployment challenges felt by the previously mentioned industries, ALL industries will eventually feel the ripple effect. This could potentially reduce the number of viable buyers from our “professional industries” as well as reduce buyer willingness to purchase at current home prices.
- Two – Foreclosures and shortsales could drastically increase due to an increase in unemployment and/or closing of small businesses. If this occurs and we experience an increase in new construction, housing supply will significantly increase, reducing buyer demand and dramatically slowing current home value appreciation.
- Three – Interest rates can not stay this low forever. I hate to remind everyone…but interest rates below 3% for home financing is not the norm. Hesitancy and reservation to increase rates may be related to the current COVID pandemic and eventually these rates will slowly begin to increase, potentially reducing the buyer demand.
IN CONCLUSION – I wish I had a crystal ball but unfortunately I traded it for magic beans many years ago. What I do know is that it is very unlikely that any one of the three concerns I’ve described above could, by themselves, create a “Housing Crash”.
What I also know is that if two or three or more of these, or any other dozen of additional variables, all come to fruition simultaneously the current housing market could experience a VERY quick and significant shift. Housing market shifts are inevitable and unavoidable and the only solution is to create a strategy plan for your specific goals.
For more information on how to create a customized Real Estate Wealth strategy plan please contact our family owned and locally operated team of Real Estate Advisors. Tony Giangreco and The Mind Right Realty Group of Keller Williams can be reached at 262-244-5857 or firstname.lastname@example.org.