The COVID-19 crisis significantly impacted the residential real estate market this spring. Health concerns and stay-at-home orders led to fewer buyers looking for homes and fewer sellers willing to list their properties or allow strangers to enter their homes during a pandemic.
Unlike past economic challenges, COVID-19 is having an immediate, widespread impact on the CRE industry across the globe. Despite the steep downturn during the early spring, home sales rebounded in the summer. At the same time, the health crisis generated an economic toll in the form of job losses and uncertainty. Because of health concerns, stay-at-home orders and economic uncertainty, many metro areas experienced a noticeable drop in home sales.
Despite the large drops in home sales due to the pandemic, real estate activity began to improve in the late spring, approaching pre-pandemic levels by the summer. Potential buyers started to increase their housing search and purchase activity by the end of May.
Millions of renters have fallen behind on their rent, fearing eviction while accumulating debts they cannot pay. Missed payments are putting pressure on the nation’s already fragile affordable housing supply. And prices for owner-occupied housing have soared while the inventory of for-sale homes has plummeted. These disparate outcomes in housing market segments mirror the pandemic’s uneven impact on labor markets, with college-educated professionals working from home while low-wage service workers experience the highest rates of job loss. In some ways, the current economic situation is the inverse of the Great Recession.
However, over the course of the last few months, especially as the hope of “normalizing” back to pre-pandemic life has continued to grow, economic growth and consumer spending has also followed a positive trajectory.The housing market has followed a similar trend with stock market, with relatively low mortgage rates and more positive consumer sentiment fueling a sudden interest in home buying.
Finally, the pandemic speeds up the digitalization in all real estate markets as a catalyst for the entire economy in general and the banking and real estate sector in particular. These difficulties highlight the need for digitalization and the use of artificial intelligence, machine learning, data analytics and the cooperation with Fintech firms and technology providers to facilitate existing processes. The increased use of digital channels across all real estate sectors will increase market transparency as well as market efficiency.