Do you even remember the last time you read something that wasn’t pandemic-related? Unfortunately, in spite of global efforts to curb the Coronavirus, it continues to affect nearly everyone around the globe. We have already discussed the potential effects of the pandemic on the housing market in the USA. However, as the virus continues to hold the economy in a death-like grip, a more realistic picture has emerged as to how the pandemic is impacting buyers and sellers alike.
In this article, we will be discussing major housing market trends for May 2020. Let’s get started.
1. The Number of Home Listings Continue to Drop
As per Redfin, the number of new home listings declined by 40% in the last week of April on a year-on-year basis. However, this was still a relative improvement from the number of listings observed a little earlier in the month where a 50% decline was reported. Around 210,000 new listings were reported all over the country. The slight recovery is a positive sign with sellers willing to put their homes on sale in spite of the current situation and can help stabilize the current supply and demand for homes.
2. Home Prices See a Moderate Increase
As predicted in our last article discussing the impact of the Coronavirus on the housing market in Indianapolis, home prices have increased by 1% compared to the previous year.
As per real estate experts, we can expect listing prices to stay relatively flat for the time being. This is primarily because there are fewer luxury homes available for sale at the moment. As a result, the average listing price has fallen.
Primarily, this is beneficial for buyers as it has reduced the competition and opened more opportunities for negotiation.
3. Listings Are Being Taken Down
In April, the number of active listings in the housing market decreased by 8%. It appears that some sellers have changed their minds about selling their houses and are choosing to delist. Nearly 56% of homes were delisted in April on a year on year basis.
Once again, this is likely because of current price trends remaining relatively flat, thereby reducing your chances of making a significant profit.
4. Real Estate Agents Adapting to the Situation Through Virtual Tours
Given the lockdowns in place, open house tours are out of the question for most home buyers. Real estate agents are attempting to fill in the gaps by offering virtual tours of the property instead.
While this isn’t nearly as good as seeing a house in person, if you are serious about investing in real estate, then this one housing market trend that you’ll have to get behind on. There are several ways to arrange virtual tours. You can ask your real estate agent to take you through a 3D tour of the house. You can also request a tour over live chat video. Generally, the latter is more reliable since you can ask the real estate agent to show you every aspect of the house up-close.
5. Real Estate Financing Becoming Difficult
Recently, lending institutions such as banks have made some changes regarding credit policies for home equity loans. This has proven to be a significant barrier toward homeownership.
Large banks have become increasingly reluctant in approving large loans that are pivotal in the purchase of high-end properties. Average borrowers are also feeling the impact. Banks like JPMorgan Chase have increased their minimum credit score requirement to 700. They are also requiring borrowers to submit 20% of the loan amount as down payment which is significantly high for the average home buyer.
Bank like Wells Fargo has also increased their credit score requirements to 680. Additionally, Wells Fargo has also made several of its mortgage products unavailable. These include cash-out refinance loans and non-conforming loans. These loans tend to be riskier and with the current situation, banks are proceeding with caution. Home equity loans with a value of about $250,000 are also currently unavailable.
These housing market trends are primarily a result of the rising rate of unemployment across the country. Homeowners have started to default on their mortgages, thereby forcing banks to adopt more stringent regulations against issuing new home equity loans.
6. Real Estate Investment Stocks Continue to Grow
While home buyers and sellers may be reconsidering their decisions, investment in real estate is at a relatively healthy level. Some of the best real estate stocks to consider investing in for May 2020 include:
- Vornado Realty Trust
- Simon Property Group Inc.
- Host Hotels & Resorts Inc.
These stocks have a relatively low P/E ratio indicating that you can invest a relatively low amount and generate significant profits. Other real estate stocks that are growing in value include:
- Apartment Investment and Management Co.
- Digital Realty Trust Inc.
- SL Green Realty Corp
These stocks generated a high EPS (earnings per share) in the first quarter of the year and we can expect them to grow at the same rate in the next quarter, as well.
Wrapping It Up
As governments around the world continue to grapple with the situation, home buyers, homeowners, and real estate investors need to assess how the pandemic is influencing the real estate market in the USA.
We can expect the aforementioned housing market trends to remain dominant for a while until the number of COVID-19 cases declines and state-wide lockdowns are lifted.
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