The short answer, and this is all speculative, yes. I think real estate prices are both going down and up. Not too sure how much it will or if it will be a big situation yet. You can already see hotel prices heading down now. Vacation rentals have been cancelled and Florida tourism is almost nonexistent. Venice beach is supposed to be busy right now during March and April. However, public parks and beaches have been closed. As a result, rental property and real estate demand have fallen dramatically in a short amount of time.
Now good news, there is a lot of intervention from the banks and Federal Reserve to help prevent a great negative financial situation. For example, they lowered interest rates making it potentially more tempting for buyers and investors. They have tools needed to help prevent a huge financial disaster, so it is up to them if they want to risk hyperinflation and print the money needed to overcome every citizen’s misfortunes from this pandemic.
This could mean real estate won’t even see a blip in the red as no one will face foreclosure as a result from this situation if it is a possibility. Buyers will still have the financial capability to buy, while the banks have enough to lend. It will be like almost nothing happened. This could keep real estate prices up climbing even further.
Last Month, Real Estate Prices Increased!
Real estate is a slow moving market compared to the stock market. A crash in the stock market will probably take a few weeks before real estate will be affected. Same thing is happening now, the real estate industry last month March, have seen higher prices in the top cities in America. Up 2-7% from February in some cities. This month, April, will be the month to see how the market will be affected from the recent extreme movements in the stock market.
I do think now is the time to sell if you are in the buy low sell high market. Wait a few months to see how low prices have gone and prepare to buy real estate back at lower prices. It is still a slight risk however, as even if prices are lower, mortgage interest rates are looking to rise with this situation, basically keeping net price the same.
Mortgage Lenders Have More Strict Rules
As the pandemic continues on, it seems the borrower requirements increased. This could mean interest rates are increasing, higher fees, and higher credit score requirements. Of course, if you are buying a property in cash, no problem there. Most agencies will be open to transact along with all the other companies needed to close on a property.
Will Foreclosures Increase or Decrease?
When it comes to banks foreclosing on a property because of non-payment, maybe they will work with owners to come to an agreement to pay on the home later on in the year. This doesn’t mean those payments will not be made, simply they will be added to future months. As this will create a buffer for those directly affected, maybe foreclosures will not be on the climb.
If it does start happening, this will increase supply in the market along with those wanting to sell so they won’t be underwater. As a result, a possible large slow decrease in the real estate market can happen. This is because everyone would want to sell at market price with the additional homes on the market.
Luckily, it probably won’t happen fast and if any decrease happens, I am quite certain holding on to the property will yield higher returns than letting it go. Basically the market will bounce back to higher prices never before seen. Additionally, the stock market should see similar results as well, helping everyone receiving their wealth back if any losses occurred.
With everything going on, it is important to see what the market tells us along with listening to what the news and people say to help judge on whether or not real estate market prices increase or decrease.
The Federal Reserve has a lot of tools they can use to help prevent a sudden crash in the real estate market, and with the help of the US government and the States help, they also can help limit the pain already felt in the real estate market. Preventing it fully might not be possible without a huge cost; however, it does seem it could help a lot and might be worth exploring to help see real estate prices bounce back higher than ever before.
That’s all for now, thanks so much for reading. Are Real Estate Prices Going Up or Down? Let us know what you think below.
Until next time, See ya!