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Impact of the Coronavirus on the U.S. Housing Market

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Impact of the Coronavirus on the U.S. Housing Market | MyKCM

The Coronavirus (COVID-19) has caused massive global uncertainty, including a U.S. stock market correction no one could have seen coming. While much of the news has been about the effect on various markets, let’s also acknowledge the true impact it continues to have on lives and families around the world.

With all this uncertainty, how do you make powerful and confident decisions in regard to your real estate plans?

The National Association of Realtors (NAR) anticipates:

“At the very least, the coronavirus could cause some people to put home sales on hold.”

While this is an understandable approach, it is important to balance that with how it may end up costing you in the long run. If you’re considering buying or selling a home, it is key to educate yourself so that you can take thoughtful and intentional next steps for your future.

For example, when there’s fear in the world, we see lower mortgage interest rates as investors flee stocks for the safety of U.S. bonds. This connection should be considered when making real estate decisions.

According to the National Association of Home Builders (NAHB):

“The Fed’s action was expected but perhaps not to this degree and timing. And the policy change was consistent with recent declines for interest rates in the bond market. These declines should push mortgage interest rates closer to a low 3% average for the 30-year fixed rate mortgage.”

This is exactly what we’re experiencing right now as mortgage interest rates hover at the lowest levels in the history of the housing market.

Bottom Line

The full impact of the Coronavirus is still not yet known. It is in times like these that working with an informed and educated real estate professional can make all the difference in the world.

Real Estate Is Soaring, But Not Like 2008

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Real Estate Is Soaring, But Not Like 2008 | MyKCM

 

Unlike last year, the residential real estate market kicked off 2020 with a bang! In their latest Monthly Mortgage Monitor, Black Knight proclaimed:

“The housing market is heating entering 2020 and recent rate declines could continue that trend, a sharp contrast to the strong cooling that was seen at this same time last year.”

Zillow revealed they’re also seeing a robust beginning to the year. Jeff Tucker, Zillow Economist, said:

“Our first look at 2020 data suggests that we could see the most competitive home shopping season in years, as buyers are already competing over…homes for sale.”

Buying demand is very strong. The latest Showing Index from ShowingTime reported a 20.2% year-over-year increase in purchaser traffic across the country, the sixth consecutive month of nationwide growth, and the largest increase in the history of the index.

The even better news is that buyers are not just looking. The latest Existing Home Sales Report from the National Association of Realtors (NAR) showed that closed sales increased 9.6% from a year ago.

This increase in overall activity has caused Zelman & Associates to increase their projection for home price appreciation in 2020 from 3.7% to 4.7%.

Are we headed for another housing crash like we had last decade?

Whenever price appreciation begins to accelerate, the fear of the last housing boom and bust creeps into the minds of the American population. The pain felt during the last housing crash scarred us deeply, and understandably so. The crash led us into the Great Recession of 2008.

If we take a closer look, however, we can see the current situation is nothing like it was in the last decade. As an example, let’s look at price appreciation for the six years prior to the last boom (2006) and compare it to the last six years:Real Estate Is Soaring, But Not Like 2008 | MyKCMThere’s a stark difference between these two periods of time. Normal appreciation is 3.6%, so while current appreciation is higher than the historic norm, it’s certainly not accelerating beyond control as it did leading up to the housing crash.

Today, the strength of the housing market is actually helping prevent a setback in the overall economy. In a recent post, Odeta Kushi, Deputy Chief Economist for First American explained:

“While the housing crisis is still fresh on the minds of many, and was the catalyst of the Great Recession, the U.S. housing market has weathered all other recessions since 1980. With the exception of the Great Recession, house price appreciation hardly skipped a beat and year-over-year existing-home sales growth barely declined in all the other previous recessions in the last 40 years…In 2020, we argue the housing market is more likely poised to help stave off recession than fall victim to it.”

Bottom Line

The year has started off very nicely for the residential housing market. If you’re thinking of buying or selling, now may be the time to get together to discuss your options.

Most Renters Are Paying Far More Than Their Landlord’s Mortgage

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Most Renters Are Paying Far More Than Their Landlord's MortgageIn the overwhelming majority of the 50 largest cities across the U.S., monthly rent is more than the mortgage payment for single-family homes. In several cases, much more.

Global answering service and chat support company Moneypenny compiled data from Zillow on median rent and mortgage payments from July 2014-July 2019.

In order to calculate the monthly mortgage payments, Moneypenny took the median home sale prices during the same time period and in the same major cities and then used nationally-average mortgage terms: 30-year fixed rate at 4% with approximately 6% down.

Once the two figures — median monthly rent and median monthly mortgage — were calculated for each city, they were compared side-by-side. The data may surprise you.

From Less Than Half To More Than Triple

In just seven of the 50 cities analyzed, tenants pay less rent than the owner’s mortgage payment each month. In 28 of the cities — well over half, tenants are paying more than 150% of their home’s mortgage. The city with the highest rent-to-mortgage ratio, Miami, shows that renters pay more than 300% of their landlord’s monthly mortgage payment on average.

Rounding out the top five are New York (276%); Riverside, California (231%); Boston (230%); and San Diego (221%). At the opposite end of the spectrum is New Orleans, where tenants pay just 49% of their home’s mortgage each month, followed by Richmond, Virginia (57%), and Kansas City, Missouri (82%).

An interesting data point is that the median monthly mortgage payment in Miami is $720, while in New Orleans it’s $2,857.

Not-Necessarily-For-Profit

While it makes perfect sense that rent prices in hot real estate markets are higher, some may still be surprised by the disparity between rental amounts and monthly mortgage payments. However, it’s important to note that even in the cities with the biggest gap, landlords are not necessarily pocketing the excess and enjoying a nice profit. While it’s certainly possible that they may be, homeowners are more likely putting some of that money back into the house in the form of improvements and maintenance, as well as setting some of it aside for large emergency repairs.

If you are in the market for a new home or interested in refinancing your current property, be sure to contact your trusted real estate agent and home mortgage professional to discuss financing options.

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