How Covid-19 May Affect Home Values
Immediate Effect of Covid-19 on the Value of My Home
The residential real estate market was hit hard in the spring of 2020. The health concerns of the virus and the government’s lockdown caused an immediate decrease in the number of sellers and buyers.
During that time there were very few homes selling the traditional way. Sellers who said, “I need to sell my house quickly” or “sell my house fast”, had little hope of finding a buyer. At that time, the only home buyers were companies that buy houses for cash.
The effect of Covid also dramatically decreased the number of sellers. Citing health concerns, many individuals refused to allow strangers to enter their homes or list their properties. Sellers and buyers were hunkering down and doing everything they could to avoid contact with strangers.
To put this in perspective, the number of homes that were delisted (taken off the market) increased 25% between March and mid-April 2020 compared to the same period a year earlier. This was followed by a 40% drop in new listings in April 2020 compared with April 2019.
To the surprise of many experts and economists, this downturn was short-lived and for the most part, the housing market has been resilient and quickly rebounded. For the near future, this trend is expected to continue in most markets, except for large urban areas as explained below.
Covid Has Changed How We Live and Work
There is no question that Covid-19 has affected every part of our daily lives. Society’s initial response was shock and fear, which was highlighted by the hoarding of toilet paper. This was followed by short-term lifestyle changes and adjustments, including the creation of new terms like social distancing and essential employees/businesses. Society has now entered the final phase of acceptance and the establishment of a new normal.
Although not all of the permanent changes brought on by the Covid-19 can be identified at this time, it is clear that the pandemic has permanently changed how we live and work. In this article, we will discuss the changes to how we live and work and look forward to seeing if we can answer the question “Will Changes Caused by Covid-19 Effect the Value of My Home”.
Let’s Start by Looking at How Society has Coped and Adjusted
Remote working or working from home is considered one of the largest and most fundamentals changes that became a necessity due to the Covid-19 pandemic. Thousands of workers who once commuted to the office were now forced to work from home, and the experts were even surprised that remote working increased productivity, employees were happier and more satisfied with their jobs.
The shift has been so profound that in a recent State of Remote Work Survey 84.5% of companies intend to continue offering some remote work options after the pandemic is resolved and many companies have created a permanent remote working policy. One thing is clear, with remote working here to stay the US housing market will adjust accordingly.
While the full effect of this massive shift to remote working on the housing market is not clear, it does seem clear that the residential housing in the high priced major employment centers of San Francisco, Los Angeles, New York, and Seattle will have a drop in demand along with prices.
Now that people are working remotely, the daily commute to the office is no longer a consideration so many real estate professionals expect remote workers to re-evaluate where they are living and over time many will decide to relocate to smaller cities and towns that have affordable housing and offer a superior lifestyle.
How quickly this migration out of high-priced cities happens and to what extent is open to debate but the statistics indicate that the exodus has already begun.
Not surprisingly, our housing preferences are being altered by the shift to remote working. When the average person was commuting to work, the amount of waking hours spent in their home was typically less than the hours worked daily. In other words, most of us spent more time commuting and being at work than actually living in our home.
With remote working, the average person is spending 12 or more waking hours in their home, and the amenities and workspace of the home have become much more important. For a remote worker and their family, the next house they will buy will need to meet their post-Covid-19 lifestyle. This includes homes that have the following features:
When you are working from home, having a dedicated home office is no longer a luxury but becomes a necessity. This is your private workspace that has your computer, printer, files, and other work necessities that make remote working possible. Although this space is part of your home, in many ways it is treated differently, it becomes the private domain of the person who works from home. This is quickly becoming the number one requirement of home buyers.
Covid-19 has brought us lockdowns, homeschooling, and remote working. All of these have families spending more time together than ever and have created a new appreciation for separate living areas, play areas, and private spaces where a family can be together but still has some private space when needed. This does not bode well for the open space concept of previous years with many professionals expecting to buy homes with distinct spaces and layouts that provide some degree of separation.
Amenities & Outdoor Space
One thing everyone has learned while being locked down, having a home with a lot of amenities or large outdoor space is invaluable. Future homebuyers will be seeking homes that offer features and outdoor spaces that allow us to be entertained without having to leave our home.
This may affect home values going forward, especially if we endure more lockdowns and a resurgence of Covid or another pandemic
Another lesson provided by Covid-19 is the importance of having family near or living with you. With so many children out of school or being homeschooled, having a grandparent provide childcare became imperative for many families. Likewise, many of our elderly loved ones needed their adult children to provide medical care. This trend towards multigenerational housing is expected to continue and homes that allow extended families to live together may become increasingly in demand.
Another effect of Covid-19 on the US housing market is the fear factor. The highly urbanized areas of the United States have seen the greatest number of Covid-19 cases and deaths, as well as the most severe lockdowns and disruptions. For a city like New York that averaged over 1.5 million subway passengers a day before Covid-19, having a disease as easily transmitted and potentially deadly as Covid-19 was devastating. The same problems were felt in other highly urbanized cities like Los Angeles, Chicago, and Boston.
On top of the problems brought on by Covid-19, the recent riots, property damage, rising crime, and homeless crisis are driving people out of the big cities. It really boils down to safety and quality of life issues. The benefits of living in the city are quickly being eroded and many people are seeking safety and quality of life outside the city.
The exhilaration of living in a large city with millions of people was soon replaced with panic, fear, safety concerns, and anyone who could leave a city, like New York, did. Polls conducted at the height of the Covid-19 pandemic of urban dwellers indicated that as many as 40% of the remaining urban residents were considering leaving their city. A more recent poll indicates that 26% of urban dwellers say they are likely to move outside of their city.
Whether the actual number is 40% or 26% is academic. With about 25.9 million people living in the 10 largest US cities, if just 26% of them move you would have an urban outflow of 6.7 million people. That is almost 2.2 million people fleeing New York City alone.
If this massive migration out of cities occurs as currently predicted, the effect on the US housing market will be profound. One question that remains, where will all of these people go?
Now let’s Look at How these Changes Might Affect the Value of Your Home
Short Term Effect on Home Values
Except for housing in large urban cities, like New York City, housing prices are expected to remain steady or increase over the next year. This is largely driven by low-interest rates and a shortage of available homes for sale.
If you are living in the high growth low tax states like Texas and Florida, you can expect the demand for your home to remain high. The same remains true for the suburbs surrounding large cities, where many of the city dwellers are moving to. However, over the next 12 months, the sales pace is expected to slow as rising mortgage rates and higher home prices create affordability issues. This will be especially true for many first-time buyers who will be priced out of the market.
On the other hand, if you are in New York City, or another city with high crime, riots, high tax, high Covid rates you can expect housing prices to be under pressure. Depending on how these cities deal with their looming problems, the cities could be in for a rough ride in the short term.
Long Term Effect on House Values
Due to the unprecedented nature of the pandemic, the ensuing job losses, and economic uncertainty, there is no safe prediction for the long-term effect of Covid on the value of your home, but there some historic indicators that will give us some insight into what you can expect. Let’s look at each indicator and see what can tell us.
The consumer confidence index measures how people are feeling about the economy and their personal finances. As expected, the confidence of consumers was greatly shaken by Covid but with the arrival of a vaccine and businesses reopening, consumer confidence is on the rise. This is a good indicator that, barring any unforeseen issues, the market is recovering and returning to normal. This would indicate that house prices will hold steady or increase over the next few years.
The unemployment and labor force participation rate is another great indicator of the condition and direction of the economy. As with consumer confidence, the indicators were badly shaken during the peak of the pandemic but over the last few months the unemployment rate is dropping and the labor force participation rate is rising, both are good indicators for the housing market and the value of your home.
Foreclosure and Delinquency Rates
The foreclosure rate and mortgage delinquency rates are good at indicating the direction of the housing market and the economic strength of the country. As of the writing of this article, this indicator is sending mixed signals. On one hand, the delinquency rate is higher than normal but there are many signs that this is improving. As long as the foreclosure rates do not spike, the additional inventory created by the foreclosures will not have a major impact on the market and the value of your home.
Mortgage Interest Rates
The rise and fall of mortgage interest rates have a direct effect on home affordability and the direction of the housing market. We are currently in a low-interest-rate environment and have been for a prolonged period of time, which is good for the housing market. This trend is expected to continue for the foreseeable future but this is one indicator to watch as rising rates will have an immediate effect on housing affordability (higher rates make homes less affordable) and the housing market will adjust accordingly and swiftly.
Days on the Market and Inventory
The average number of days it takes to sell a house and the number of months of inventory for your particular market are some of the best indicators for the value of your home. This data is for homes being sold in your neighborhood (versus the state or country) and can indicate whether home values in your area are expected to rise or fall. These reports are published monthly and provide current as well as historic data. For most markets in the United States, excluding large urban areas, the market indicators are excellent and indicate that the price of homes is expected to rise due to strong demand and limited inventory.
Based upon the current market indicators and the continuing economic recovery, housing demand is expected to remain strong with housing prices leveling off. Although the massive price appreciation of previous years appears to be coming to an end, the market should be accommodating to homeowners who are looking to sell their homes. The strongest markets and the homes that will have the greatest appreciation will be the low tax high growth areas of the country, mostly in the south. Again, the one exception to this forecast is housing in the highly populated urban areas where the conditions are too fluid to predict but all indicators currently point to a downturn, and perhaps a drastic downturn.
If you have gotten to this point in the article, you probably realized that the value of your home is greatly affected by its location. Every city, town, and community has been affected by Covid-19, but some much more than others. Therefore, you are advised to follow the national data so you can identify trends that might affect the value of your home but use local market data to ascertain the actual value of your home and local market conditions. A local real estate agent can be a great source for this information.
Brought to You By OutFactors
We Make it Easy to Sell Your House Fast for the Highest Cash Price
If you are short on time, money, or just do not want to deal with the hassle of selling your home, there is a faster and easier way, sell to a cash home buyer, like OutFactors. You can sell your Dallas Fort Worth home the quick, easy, and stress-free way. OutFactors is a home cash buyer that makes the process of selling your home very quick and simple, and we usually close in 10 days or less.
To sell my home fast for cash, all you need to do is answer four simple questions. Within a few hours, OutFactors will send you a great cash for house offer to buy your Dallas Fort Worth area home as-is. No repairs, upgrades, or cleaning needed. We will then schedule a time to do a quick inspection and complete the paperwork.
You will find that selling to companies that buy houses for cash, like OutFactors, has many benefits, like being able to choose the closing date, or with our sell and stay leaseback program, when you will move out. As a seller you have nothing to lose, getting an offer is always free and there is never any obligation. It really is that simple.
If you have a house in Dallas Fort Worth area you are interested in selling fast for the highest cash price, then we invite you to visit OutFactors.com or call 800-420-7030 for an immediate cash offer on house. At OutFactors, we offer some of the highest cash for house prices without the pressure. Take your time and decide when you are ready – we will be here when you need us!
OutFactors is a local Dallas Texas-based company that has been in business since 2001. We are proud to be managed by a Texas licensed real estate professional and are BBB accredited with an A+ rating. We are the company that buys houses for cash that you can trust and we put everything in writing using Texas standard contract forms. Want to sell but stay living in the home you love, then ask about our Sell and Stay Program. The people at OutFactors are super easy to talk to and will answer all of your questions.
We hope this article was informative and helpful. If you have any questions or would like additional information, we invite you to contact us at OutFactors.com or watch some of our 2 minute explainer videos that provide information about our cash home buying programs.
How Covid-19 May Affect Home Values| Sell My Home Fast | OutFactors — Dallas Fort Worth, Texas