The COVID-19 pandemic has had an immediate impact on the world. As countries went on lockdown, lives were quickly upended. Months later, economies continue to feel the effect of this global health crisis. In these times of uncertainty, learning more information and getting a better understanding of the situation are essential in knowing how to move forward.
The housing market is considered to be one of the primary sources of wealth for several households. At the beginning of the year, the government implemented measures to protect jobs and incomes. The response to these changes included banks pausing mortgages and landlords deferring rent collections and evictions. But as the world adjusts to the new normal, these measures are begging to lift.
The Market’s Reaction to COVID-19
With the way the housing market is set up, it often takes longer for any changes to take effect. While financial markets quickly calibrated the prices of securities as a response to the pandemic, houses for rent and sale were slower to adjust theirs. This was primarily influenced by how the latter are seen as investments.
People tend to value houses more than securities because it is a physical asset. Additionally, many choose to live in the homes they plan to sell. As a result, there is a sense of uncertainty whether prices will rise or fall in the coming months. Experts are considering the latter given the current state of the economy.
The Fall of Housing Prices
Current research predicts prices for residential properties to fall by at least 2.3 percent in the coming months. Homeowners with mortgages to pay will most likely feel this shift. As banks and other lending institutions continue to reinstate regular payment timelines, people who borrowed more against their homes will experience the effects in their home equity.
The Rise of Homebuyers
Rental transactions decreased even as lockdown restrictions were lifted. This is likely caused by the challenges that arose at the start of the year. In the event of another lockdown quarantine, renting presents several challenges that can be overwhelming to handle. These apply to both landlords and tenants. The former will lose income to accommodate the situation, while the latter is put in a constant state of uncertainty regarding their residence.
The Long-Term Impact of COVID-19
Most models are predicting that housing prices will fall, not just in the coming months, but in the following years as well. Although there will likely be no shortage of homebuyers, it will be challenging to maintain pre-pandemic prices. Fortunately, current analyses have found that most households are equipped to deal with this dip in pricing. Additionally, experts expect the government and other institutions to develop policies that will support the housing market. These include incentives such as better support for first-time homebuyers, lower interest rates, and more mortgage relief programs.
Although it will be impossible not to feel the impact of the pandemic, experts are optimistic about the housing market’s future. When compared to other markets, it is highly resilient and better at adapting to changes.