The U.S. housing market, which was headed for a hot spring-selling season, may not be so healthy after all.
As the expanding coronavirus outbreak slows economic activity, roiling markets around the world, there’s a 60% chance of the U.S. economy going into a recession this year, said Mark Zandi, chief economist at Moody’s Analytics Inc. That economic disruption would batter the housing market, despite record-low mortgage rates.
“Housing is being buffeted by two gale forces moving in opposite directions,” Zandi said, referring to low rates and virus-fueled economic turmoil. “The question is, what’s the end result of all that? In all likelihood, the recession will trump the lower rates.”
The virus arrived just in time for the housing market’s key season, which was shaping up to be one of the strongest in years. An unusually warm winter brought buyers out early to take advantage of the low rates and they’ve had to battle for listings that are more scarce than ever.
Though stocks recovered somewhat on Tuesday, markets have plunged in recent days, with down payments for some buyers evaporating. The rapid decline in oil prices this week will likely harm Texas and other states that depend on the energy sector. And as Americans hunker down at home, forgoing vacations and movie dates, service and retail workers may lose their jobs.
The economic distress will slow home sales, and prices nationally will likely flatten, or fall slightly, after years of gains, according to housing experts. Concerns about the coronavirus, and the overall economy, are already weighing on the market –- delaying some listings and keeping potential buyers on the sidelines, said Lawrence Yun, chief economist of the National Association of Realtors.
Yun sees the odds of the recession at about 40%, up from just 5% about a month ago. While the dramatic fall in interest rates may push some potential buyers into the market, the economic hit from the coronavirus could drive home sales down 10% in the short term.
“The stock market crash is no doubt raising economic anxieties, while the coronavirus brings fear of contact with strangers,” Yun said.
The potential economic fallout still hadn’t completely registered this past weekend for homebuyers in Seattle, an epicenter of the U.S. outbreak. On Saturday, around four dozen groups filed through a four-bedroom Tudor in the Whittier neighborhood listed for just over $1 million. Many said they had hoped the virus would keep other would-be buyers away in a market where there’s little inventory and bidding wars are frequent.
At another open house nearby, handshakes were out, but plenty of home shoppers came for a look. Craig Rothlin, 34, and Kanako Nakarai, 31, were among them. Both work for tech companies, and have been hurt by the recent stock market rout.