How Record Unemployment Claims Will Affect the Housing Market

As businesses across the United States have been mandated to close their doors in a desperate effort to slow the spread of COVID-19, people have been losing their jobs left and right. Now, we’re seeing the first unemployment report since the first “shelter in place” orders, and it’s far more grim than anyone had expected.

A record 3.28 million Americans filed for unemployment support in the week ending March 21—the most claims ever filed in a single week.

“Normally, when an economy goes into a recession it develops slowly over time,” says realtor.com® Chief Economist Danielle Hale. “That’s not happening this time around. … It’s pretty clear that the economy is grinding to a halt pretty suddenly.”

It will also be a tough blow to the already wobbly housing market, since those who lost their jobs are not likely to be buying a home anytime soon. Even the millions of Americans who haven’t been laid off or lost work yet are likely to hold off on a major purchase, fearing for the stability of their employment. And while ultrawealthy buyers may be insulated from the downturn, they may still balk at plunking down millions of dollars on a property they can’t even walk through. In response to this lack of demand, many sellers will likely pull their properties off the market until the crisis passes.

However, folks shouldn’t expect home prices to plunge by the double digits as they did during and after the Great Recession. In the last downturn, there were many more properties for sale, due to an overabundance of construction and mass foreclosures, than there were qualified buyers.

This time around, there is a severe shortage of housing for sale. Builders haven’t been putting up enough homes to meet demand for years. And there isn’t likely to be a huge wave of foreclosures because borrowers are in better financial shape. Plus, the federal and many state governments, along with some banks, are rolling out forbearance and other programs to help Americans who’ve lost their jobs stay in their homes. This is all likely to stabilize prices.

“Price growth will slow, and it’s possible that prices could decline” in certain markets, says Hale. “Folks expecting price declines to happen like they did during the last recession are going to be disappointed.”

The hardest-hit areas will likely be those with the highest percentage of jobs in tourism, leisure, and hospitality, the industries most affected by the novel coronavirus. But even in these areas, Hale doesn’t expect prices to go down more than 5%.

However, sales will slow down as there are simply fewer buyers and sellers in the market. Plus, it’s harder to transact remotely.

“We will see a shocking drop-off in home sales in a very short period of time,” says Hale.

They’re likely to rebound when the virus is under control, but there will almost definitely be fewer sales this year than anticipated before the pandemic.

“We don’t know when things will get back to normal,” she continues. “But when they do … we might also see a really strong bounce back.”

But Americans should expect things to get worse before they get better. Jobless claims will likely remain high until the crisis abates—and that timeline is still unclear. But the federal stimulus package expected to pass, which includes $1,200 checks to most Americans, could help to steady the markets.

“All the incoming data will also be off the chart for a few months,” Lawrence Yun, chief economist of the National Association of Realtors®, said in a statement. “The key is whether the stimulus package can reverse all these damages by the second half of the year.”

By Clare Trapasso | Mar 26, 2020

I read this article HERE  

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Sabrina Caton - The Caton Team - Realtors

Sabrina & Susan are native Californians - born and raised in the Silicon Valley with a passion for Residential Real Estate. A mother and daughter-in-law duo called - The Caton Team. With over 35 years of combined, local Real Estate experience and knowledge – would’t you like The Caton Team to represent you? Let us know how we can be of service. Contact us any time. Call | Text at: 650-799-4333 | Email Info@TheCatonTeam.com The Caton Team believes, in order to be successful in the San Fransisco | Peninsula | Bay Area | Silicon Valley Real Estate Market we have to think and act differently. We do this by positioning our clients in the strongest light, representing them with the utmost integrity, while strategically maneuvering through negotiations and contracts. Together we make dreams come true. The Peninsula is our backyard - let us help make it yours. We represent Buyer’s and Seller’s throughout the Bay Area. The Caton Team – Susan & Sabrina A Family of Realtors Effective. Efficient. Responsive. What can we do for you?

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