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    What Impact Might COVID-19 Have on Home Values?

    A big challenge facing the housing industry is determining what impact the current pandemic may have on home values. Some buyers are hoping for major price reductions because the health crisis is straining the economy.

    The price of any item, however, is determined by supply and demand, which is how many items are available in relation to how many consumers want to buy that item.

    In residential real estate, the measurement used to decipher that ratio is called months supply of inventory. A normal market would have 6-7 months of inventory. Anything over seven months would be considered a buyers’ market, with downward pressure on prices. Anything under six months would indicate a sellers’ market, which would put upward pressure on prices.

    Going into March of this year, the supply stood at three months – a strong seller’s market. While buyer demand has decreased rather dramatically during the pandemic, the number of homes on the market has also decreased. The recently released Existing Home Sales Report from the National Association of Realtors (NAR) revealed we currently have 3.4 months of inventory. This means homes should maintain their value during the pandemic.

    This information is consistent with the research completed by John Burns Real Estate Consulting, which recently reported:

    “Historical analysis showed us that pandemics are usually V-shaped (sharp recessions that recover quickly enough to provide little damage to home prices).”

    What are the experts saying?

    Here’s a look at what some experts recently reported on the matter:

    Ivy Zelman, President, Zelman & Associates

    “Supported by our analysis of home price dynamics through cycles and other periods of economic and housing disruption, we expect home price appreciation to decelerate from current levels in 2020, though easily remain in positive territory year over year given the beneficial factors of record-low inventories & a historically-low interest rate environment.”

    Freddie Mac

    “The fiscal stimulus provided by the CARES Act will mute the impact that the economic shock has on house prices. Additionally, forbearance and foreclosure mitigation programs will limit the fire sale contagion effect on house prices. We forecast house prices to fall 0.5 percentage points over the next four quarters. Two forces prevent a collapse in house prices. First, as we indicated in our earlier research report, U.S. housing markets face a large supply deficit. Second, population growth and pent up household formations provide a tailwind to housing demand. Price growth accelerates back towards a long-run trend of between 2 and 3% per year.”

    Mark Fleming, Chief Economist, First American

    “The housing supply remains at historically low levels, so house price growth is likely to slow, but it’s unlikely to go negative.”

    Bottom Line

    Even though the economy has been placed on pause, it appears home prices will remain steady throughout the pandemic.

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    Danny Cheung

    I spent over twenty five (25) years with the Department of Defense in the hardware/software design and development as well as program management prior to joining the Group in a full time capacity. I am thrilled to put my years of experience as an Electronics Engineer to assist and lead our Real Estate Group to the next level. I am committed to establishing the tools and resources necessary for our team members to work more seamlessly and effectively thus ensuring our clients full satisfaction. My wife and I have two daughters and a dog (he's more like our son). I enjoy travelling and watching sports especially football…Go Skins!

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