Natural disasters, viral and bacterial outbreaks, and global events have always affected the countries in all aspects, especially in trade and business terms. Whether it is the Cholera outbreak, HIV pandemic, Influenza pandemic, or the famous world wars, these events are not only responsible for deaths of millions of people, but they also decimated the global as well as local economies. They have brought recessions and severely negative outcomes in terms of financial matters for the US Real Estate Market.
November 2019 saw a viral outbreak in Wuhan city of China, which is one of the strongest economies in the world. The outbreak (later named as Corona Pandemic or COVID-19) was taken lightly in its early days and was not dealt with proper measures. But, even the tiniest of things can cause troubles of unimaginable scales, and the same was the case with the corona pandemic. Spreading like a “jungle fire,” it had affected the whole city of Wuhan, and now people started realizing its intensity, but it was too late by then.
The virus made its way through the other cities of China as well as other countries as well. In the coming four months, the virus had taken over a significant part of the world, including Asia, the Middle East, Europe, and America. At the start, it was affecting the routine life slightly, but with the passage of time, it has wreaked havoc all over the globe and forcing many states and countries to go for a “lock-down” option.
Where it has affected countries all over the globe, it has not spared the United States of America and Canada as well. It affected the domestic and international affairs, and then a lock-down in several states have made matters even worse. It is affecting the economy with great intensity and has damaged the real estate markets trends as well. How much will this affect the US Real Estate Market? Well, technically, it is difficult to estimate the accurate value, but it will have a severely negative impact on the United States’ real estate market. Here is how this outbreak can affect the real estate market:
Impeding the real estate market growth:
As this pandemic outbreak has impacted all business sectors. The real estate market is also getting a hit. With the economy faltering, people prefer to stay at home at any cost. The end consumers prefer lesser and lesser spending, and buying or selling a property is their least concern right now. From the buyers’ perspective, they are saving every single penny to get through this dark period. Buying a house is undoubtedly at the bottom of the list as far as priorities are concerned. This will surely affect the US real estate market.
Higher chances of defaults from “helpless tenants”:
With the businesses being forced to shut down their physical operations and employees being asked to work from home, things are getting very messy. Although it may not affect “giant businesses” like Google, Microsoft, Amazon, Facebook, etc. because organizations like these are providing services that can be managed with “work from home” idea. But, when it comes to manufacturing or trading concerns, things become very difficult for you because you cannot work from home in this case.
Companies like Coca Cola, Ford, Nikola, and similar giant corporations may still find feasible ways to compensate their employees in this critical time, but it may be very difficult for SMEs (small and medium enterprises) and other similar businesses to keep up with this. This may result in salary-reductions, pay-cuts, and temporary unemployment. This can affect a common man’s capacity to pay rentals in time. Moreover, those who work on daily wages will be significantly affected.
The inability to pay rentals on time will definitely hurt the owners or investors. Investors may be forced to take some extreme measures, including asking the tenants to vacate the properties, or they might even consider selling them at lower costs. Surely, that is not good for the business!
Effects of the lock-down:
Now, it is evident that the economic crisis occurring due to corona-virus is affecting the life of every individual. Buyers are reluctant to spend money on things that are not that necessary for their survival right now. They are opting to save as much money to get out of these crises. Moreover, they are also reluctant to go places to visit properties because this virus can quickly transfer in a social gathering.
Similarly, on the other hand, sellers are also not very welcoming as far as those “visits” by buyers are concerned. People are afraid of any physical contact and are opting to stay indoors as much as possible. Social distancing has forced people to remain quiet, and of course, this is definitely not good for the market.
Tough times for Real estate agents:
No one can deny the importance of realtors in the real estate market. Real estate agents are one of the prime sources that are responsible for conducting real estate transactions. Now, it is not difficult to comprehend that the current situation is not very friendly for the real estate agents as well. Real estate agents mostly move a lot and go door to door for their marketing campaigns, and they also arrange visits to the concerned properties for potential buyers.
Now, with the current situation, neither buyers nor sellers are willing to go outside without the utmost necessity. Moreover, the lockdowns have made it impossible for real estate agents to carry out their campaigns. Marketing is one of the core elements for the success of every business, and the same goes for real estate. Realtors are left with no choice, but only digital marketing, and that cannot cover for the losses they are suffering.
In short, the corona is not only affecting real estate trading, but it is also affecting real estate agents very severely because a lesser number of deals mean lesser commission. Moreover, the real estate agents have been advised by the authorities to stop holding open-houses sessions anymore. Surely, it is a tough time for realtors.
People are pulling out their money from escrows:
Everybody knows the importance of Escrow in real estate deals. Whether it is paying the insurance amount or tax, closing the real estate deals, or paying the interest, escrow accounts play a very vital role in this business. But, after the uncertainty and fear have taken over the whole world, people are also backing out from their escrow accounts. Things can get worse if this outbreak is not contained quickly.
The real estate market in Canada sees a booming period that starts in February as the snow starts melting, and things become a lot easier. This period is considered the busiest period in the Canadian real estate market. But, with this corona outbreak, things have slowed down in the Canadian real estate market as well. Real estate agents are forced to arrange digital meetups and use other online platforms, and this has affected the proceedings because the real estate transactions have gone down considerably.
During February 2020, the real estate market in Canada saw a booming trend. As compared to 2019, sales volume had gone up by 27 percent in February 2020. But, now things are going downwards, and real estate business is getting hits due to the corona outbreak.
Foreign investors may choose to invest in States? A blessing in disguise?:
When you talk about foreign real estate investors in the United States, China stands at the top of the list. This corona outbreak may have a positive effect. As far as foreign investment is concerned in the United States real estate market. How? Well, luckily, for the time being, the United States is one of those countries. That are not affecting by corona-virus that much. While things are a lot worse in Asian countries. People are looking to invest in “real or physical assets” in safer territories.
Right now, the United States seems to be the better and safer choice for foreign real estate investors. You might shock to hear that real estate investment. From Asian investors has increased by 450% in the past month. Well, that’s a positive.
No one can deny the impact of this disastrous outbreak. It is responsible for the deaths of thousands of people all over the world. While many are affecting by this. Not only this, but it is also proving to be a nightmare for economies as well. What’s more concerning is that there is still no cure for the disease. So, it is spreading at a rapid pace as well. Things can get a lot worse if this thing keeps on marching like this. Although the united states are not much affected by this corona-virus. Yet its presence will threatening until its cure or remedy finds.
If you are seller:
Now is not the right time to sell your property because things are getting worse with every single day. Hence, you might end up selling your property “cheaply.” If you can get through this period, things will definitely get better.
If you are a buyer:
Now might be the best time to invest because there are some stressed or afraid sellers. You may not get market competitive or desired rentals now. But once this is over, you will not regret your decision.