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Will Real Estate Change Post COVID-19?

Apr 28, 2020 4:00:00 AM

For several months, the world has been fighting the spread of coronavirus, and thousands of people have been affected by the pandemic. Many countries have closed borders, imposed trade restrictions, and declared mass quarantine. The panic associated with COVID-19 is shaking even the most stable global markets. For example, the US real estate market is preparing for serious losses, and American realtors say that there is a serious decline in sales of residential property.

In 2019, one of the largest real estate services in North America, Zillow surveyed more than 100 experts who predicted crises in the US real estate market by the end of 2020. But the outbreak of coronavirus seems to speed it up and worsen the expectations.

What Awaits Commercial Property?

First of all, difficult times have come for commercial real estate. People are working from home, demand for offices has decreased, hotels are empty, and many shops are closed. There are also big problems with rent payments, in some cities, rent payments have literally collapsed. 

Companies operating in the short-term rental real estate market are laying off staff. In early April, Airbnb's short-term rental service lowered its cost estimate by 16% to $ 26 billion. But Airbnb is fighting for life, the company allotted $ 250 million to compensate apartment owners who lost profits due to cancellation of reservations due to coronavirus and also attracted investments in the amount of $ 1 billion.

There is another interesting fact that may influence commercial real estate after the pandemic. Many analysts believe that despite the fact that quarantines will be canceled, people like pro essay writer specialists, IT developers and other remote staff will still work from home more than before, not everyone will return to offices. And many will continue to shop online, not returning to offline stores.

Some regions of the United States, such as Texas, suffer not only from coronavirus but also from low oil prices with rising unemployment, where the real estate market receives a double blow.

Residential real estate market in the US

If not for the spread of COVID-19 outside of China, the situation in the housing industry in the country could be one of the best for many years. The number of new homes sold in February reached a maximum in almost 13 years - 231 thousand, which has not been observed since the beginning of 2007. But then the spread of coronavirus hit the entire real estate sector, as well as economic activity in general.

In the early days of March 2020, the US Federal Reserve had to lower interest rates. Thus, the average fixed rate for a mortgage with a 30-year maturity decreased to 3.5%. And there was also an interest decrease to 2.92% for loans with a 15-year installment plan. However, some analysts are already talking about the upcoming mortgage crisis, which could cover the United States like in 2008. According to economists, a drop in market activity will lead to the impoverishment of many households, and people simply will not be able to count on purchasing their own housing. Thus, the demand for residential property will begin to decline rapidly, and the growth in the cost of square meters will stall for an unknown period.

At the moment it is difficult to make any forecasts. But the expected extension of the quarantine will lead to a sharp reduction in working capital. With this development of events, demand for real estate will not increase either due to lower interest rates, or because the rise in prices for it, which had lasted several years, may slow down, or even stop.

 

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