The U.S. housing market has been in the crosshairs of the novel coronavirus pandemic for over a month, but it looks like the time of crisis may already be upon us. List prices have started plunging in the past month, according to Redfin data, even as sellers are fleeing the market in light of the COVID-19 outbreak.
Redfin reports that prospective home sellers are now willing to accept a lower price. The median price of homes that were newly listed for sale in the week ended March 29 fell to $309,000 – a drop of $21,000, or 6%, from the prior week.
This steep weekly price drop came despite a sharp drop in listings. New listings for the week ending March 29 fell a whopping 33% year-over-year, indicating that homeowners are losing confidence in the market.
The drop in pending home sales was another alarming metric. Redfin reports that pending home sales plunged 42% annually during the week. This drop is not surprising as mortgage applications for the week ended March 27 fell 11% from the prior week.
Redfin isn’t the only one pointing toward a U.S. housing market crash. Realtor.com also reports of slowing home price growth. Values edged up 3.3% annually for the week ending March 21 and 2.5% in the subsequent week. Realtor also points out that new listings plunged 13.1% and 34% year over year during those two weeks.
Realtor.com’s chief economist Danielle Hale wrote:
The U.S. housing market had a good start to the year. Despite still-limited homes for sale, buyers were buying and builders were building. The pandemic and virus-fighting measures appear to be disrupting that initial momentum as both buyers and sellers adopt a more cautious posture.
What’s more, things might get worse for the U.S. housing market in the coming months as the economic fallout of the COVID-19 outbreak takes hold.
The fact that home sales, prices and supply are all going south at the same time indicate that the housing bubble may have finally burst. That’s not surprising as people are less likely to buy real estate under the current circumstances.
After all, the number of Americans filing for initial unemployment claims has been going through the roof of late. The Labor Department reported that 6.6 million Americans filed for initial unemployment claims for the week ending April 4. This was the second-largest number on record since 1967.
A total of 16.8 million workers have filed for initial unemployment claims in the past three weeks. That casts a negative light on the housing market, as potential buyers are expected to dwindle in the wake of a potential job crisis.
CNN reports that the unemployment rate in the U.S. could hit the double digits in the coming months as compared to 4.4% in March.
Economists at Bank of America predict that between 16 million to 20 million jobs may be lost as a result of the coronavirus pandemic. The investment bank also adds that it may take at least two years before the unemployment rate returns to pre-coronavirus levels.
The dwindling spending power of Americans as a result of job losses is bad news for the housing market. Demand could disappear and more people might be forced to list their houses for lower prices in case of a liquidity crunch. We have already seen prices moving south, and it may not be long before we see a full-blown crisis unfolding.
Disclaimer: The opinions expressed in this article do not necessarily reflect the views of CCN.com.
Last modified: June 13, 2020 9:42 PM UTC