Like many countries in the world, the US finds itself in a coronavirus lockdown. The effects of this situation are widespread and have reached all corners of the economy including property. However, despite the media hype and uncertainty, many of the effects on the US coronavirus real estate market appear to be positive. This is particularly true for investors looking at buying now.
Buying decisions on hold, not cancelled
Spring is usually the busiest time of the year for the property market in the US, but the current situation has stalled transactions and house hunting in many states. Realtors report that buyers and sellers are mostly inactive at the moment unless they have to move forward because of previous commitments.
However, agents expect the situation to reverse as soon as the US coronavirus real estate market is under control. They believe buyers who were planning to purchase prior to lockdown will be back on the market as will those looking to upsize from small apartments or starter homes. “Realtors do expect there to be a rebound,” said Jessica Lautz, vice-president of research at the National Association of Realtors (NAR).
Meanwhile, the decision by first-home buyers currently in rental accommodation to postpone their purchase will stimulate the rental market. This is undoubtedly good news for investors looking at buy-to-let property in Florida. Demand for long-term rental properties is currently high in the state and this scenario looks set to continue in the present market situation.
Sustained interest from buyers
One thing is certain about the current situation – buyers’ interest in purchasing property will not go away. Experts believe that this will be sustained throughout the crisis, albeit by online searches and virtual open houses rather than physically visiting a property on the market.
As Dannielle Hale, chief economist at realtor.com, puts it, “the uncertainty doesn’t change people’s long-term desire to own a home”. She believes that while buyers might not be prepared to put in an offer now, “they’ll still be looking”.
Price rises because of lower inventory
Many parts of the US such as key locations for property in Florida currently have inventory levels that are low because of high demand. In the US coronavirus real estate market, the situation has worsened as fewer sellers put their homes on the market.
NAR believes that this further tightened of supply will mean prices will not nosedive. “There are many more eager buyers than reasonably priced properties for sale,” said Lautz. She added that instead of prices going down, the additional lack of inventory could actually increase them.
Not the same scenario as 2008
Lack of supply and high demand are two characteristics of the current real estate market that were not present in 2008. Over a decade ago, property in the US crashed as an oversupply of homes flooded the market where buyers were few and far between.
In 2020, the situation is the opposite. In the US coronavirus real estate market, there is a shortage of inventory and an excess of buyers. Figures for sales and median prices in many parts of the US clearly back up this scenario. In February in Florida, for example, prices experienced their 98th month in a row of increases.
More room for negotiation
A market with fewer buyers offers opportunities for savvy investors because of lack of competition. Lawrence Yun, chief economist at NAR, believes this opens the door to getting better deals. “Buyers can negotiate for better prices,” he said, pointing out that this is one of the upsides of the US coronavirus real estate market.
Record low mortgages
In addition to having room for negotiation on price, buyers also have access to low interest rates. Mortgages in the US currently sit at their lowest for 50 years and experts believe that they may fall even further over the next few weeks as the Fed brings in more economy stimulus packages.
Low interest rates mean buyers have more purchasing power. This is particularly interesting for investors who have more leverage to buy, although as in all markets, cash is still king.
Real estate market solid option
One of the main economic effects of the coronavirus has been the wild swings on stock exchanges across the world. Investors have seen millions wiped off their portfolios, sometimes in the matter of hours. The same does not apply to property.
As it always has done, real estate provides a solid pillar of investment. As a tangible asset, it offers greater control to the investor than stocks and shares. And despite their ups and downs, property markets historically always follow an upward trend. In the current situation, real estate offers the security of bricks and mortar as well as capital appreciation.
On the market now
BRIC Group offers a series of US property investment options, primarily in Florida, a state that has seen one of the strongest markets over the last decade. They include land purchases in Southwest Florida and buy-to-let investments in key locations in the state. Many of the latter come with guaranteed rental returns and all form part of the tried and trusted BRIC Group portfolio.
(Source: NAR, realtor.com)