The rapid international spread of the coronavirus is striking fear in investors and shaking financial markets. With 89 confirmed cases in the U.S. as of Monday morning, how could the near-pandemic impact the housing market? So far, coronavirus fears have prompted mortgage rates to drop. Investors are pulling their money out of stocks and putting it into steadier U.S. Treasury bonds—and when bonds perform strongly, mortgage rates tend to dip, realtor.com® reports.
But while the coronavirus may have the effect of dampening home sales in some segments of the market, low mortgage rates will continue to entice buyers and sellers, National Association of REALTORS® Chief Economist Lawrence Yun says. “Mortgage rates likely will fall to an all-time low, and buyers will want to lock in, even with growing economic concerns,” Yun says. “But expect far fewer international buyers because of travel concerns.”
Still, the freefall in the stock market is a worrisome sign. “People don’t make big decisions in a vacuum, and buying a home is a big one,” says Danielle Hale, realtor.com®’s chief economist. “If the stock market is flashing a sign that an economic slowdown is on the way, that’s when Main Street will feel it. And it could lead to a slowdown in home sales.”
The luxury housing market could be the most vulnerable, housing analysts say. Wealthy buyers tend to have more money invested in stocks. And “if you’re feeling less wealthy, you’re less likely to make a large purchase,” Hale says.
Further, Chinese buyers, whom have comprised the largest segment of foreign purchases in the U.S. over the last few years, are purchasing fewer properties, according to the National Association of REALTORS®. A temporary travel ban has been in place in order to prevent the spread of the virus, and that likely will lead to a big dip in purchases from foreign buyers.
Nevertheless, low mortgage rates may entice some buyers to purchase now rather than wait. NAR reported last week that contract signings climbed 5.2% in January compared to the previous month and were up 5.7% from a year ago. The 30-year fixed-rate mortgage fell to 3.45% last Thursday, Freddie Mac reported. “Buyers right now are trying to juggle whether or not they should jump in when mortgage rates are this low,” Ali Wolf, director of economic research at Meyers Research, told realtor.com®. “What looks like a home that’s out of reach may actually be very affordable on a monthly payment schedule.”
Low mortgage rates could cause a boost in home sales in the short term, Hale adds, but it depends on how much the virus continues to spread in the U.S. “At the very least, the coronavirus could cause some people to put home sales on hold,” says Hale. Globally, there have been 88,443 confirmed cases of the coronavirus, which causes flu-like symptoms. There have been 3,041 fatalities from the virus, 2,912 of which have been in China, according to data from the Centers for Disease Control and Prevention.
Article Courtesy of Realtor.com
