The home buying and rental season usually corresponds with spring. However, we are seeing a change this year thanks to the COVID-19 pandemic. Now that we are in the thick of stay at home orders and economies have slowed down, we can truly measure the impact COVID-19 is having on the real estate market. 


Low Mortgage Rates

The Federal Reserve has implemented emergency interest rate cuts since the beginning of the outbreak, adding to an already low number for mortgage rates. Currently we are seeing rates around 3.8%, and that number has held steady so far. Even though rates are low a lot of lenders are making it more difficult to attain mortgage credit. According to Curbed, the mortgage box has shrunk and lenders like Chase require borrowers to have a 700 credit score and 20% downpayment to get a mortgage. 


Demand High, Supply Low

The housing market was already feeling a tight squeeze this year and the pandemic has only made things more difficult. The west coast was already seeing a dip in homes for sale by the end of 2019 with a percentage of -18.5 for the LA area. The combination of a low number of houses for sale and high demand numbers has driven sale prices even higher. Buyers look for homes when major life events happen – marriage, a growing family, etc. – these life events are still happening, but, the uncertainty of the times has made supply lower.


Homebuilder Supply is Low

About one third of building material for homes comes from China, as well as completed products like appliances. With the supply lines disrupted home construction has been delayed. This comes at a time when home construction has finally seen an increase. 


A Shift to Virtual

As stated above, significant life changes don’t stop, even during a pandemic. That means buyers are still looking to purchase new homes. Real estate professionals are getting creative when it comes to giving their clients the best service possible. Social distancing protocols has made it challenging to meet in person or tour a home that is for sale. To help combat this challenge, realtors are offering virtual tours and by appointment services. 


What To Do Now?

At the time of this analysis, 41 states had announced state-wide stay-at-home orders, applying social distancing measures and limiting movement to essential activities only. Most other remaining states had regionalized measures in place as well. The economy has reacted swiftly too, with most indicators pointing to a likely recession. The near-term impact to real estate activity (next 3 to 6 months) comes as open houses on new and existing homes are being halted, shifted to virtual channels, or drastically reduced and set on an appointment-basis only. The mid-term impact (next 6 to 18 months) comes from lower buyer and seller sentiment, sustained disruptions to new and existing supply and sales funnel, and further declines in affordability from job and income loss affecting consumers.