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How the Coronavirus Could Impact the U.S. Housing Market

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A report by Bloomberg states that the coronavirus outbreak could be a “truly disruptive pandemic.” 

The death toll from the virus is approaching 3,000 with more than 80,000 confirmed cases. New cases in Italy are now shutting down the richest section of its economy. Additionally, Oxford Economics reported that an international health crisis—such as the coronavirus—could be enough to wipe out more than $1 trillion from the global GDP. 

With the economy already feeling its effects, another sector being impacted by the coronavirus is the housing and mortgage industry. A report by Markets Insider revealed the growing virus has caused mortgage rates to continue their downward slide. The report found the average rate for a 30-year fixed-rate mortgage hit 3.34% on Monday.  

The report says mortgage rates are impacted by the U.S. Treasury Yields, which have fallen as investors will “flock to so-called safe-haven assets” amid fears that the virus will slow global growth. 

On Tuesday, the yield on the 30-year US Treasury bond was still at 1.8%, a record low, while the 10-year yield fell to 1.37%, its lowest since 2012.

Realtor.com’s Chief Economist Danielle Hale said that there is limited knowledge on the Coronavirus, as well as its “human and economic impacts.” 

“There have been periods when it seemed that the virus might be relatively contained as with the SARS outbreak many years ago,” Hale said. “New information suggests that COVID-19 may be more easily spread and thus will have more wide-spread impacts. But we are still learning, and as we learn more, markets will adjust to price-in this new information.” 

The Wall Street Journal reported earlier in February that the Chinese real estate market has plummeted 90% since the virus’s outbreak. 

Eddie Shapiro, founder, President, CEO, Nest Seeker International

Eddie Shapiro, founder, President, and CEO, Nest Seeker International, said any timeframe for recovery cannot be anticipated until a strong enough vaccine is developed.  

“As of now they still anticipate months … If we judge by the first couple of months of the magnitude and the response around the world we are probably looking at years before it will stabilize,” Shapiro said. “You have two battles going on, one is the actual lockdown and physical loss of business and two is the public image battle. This is hurting the China brand in so many ways and will probably for a very long time.” 

However, one thing that the coronavirus could lead to is more investment from Chinese buyers in the American real estate market. Shapiro said Chinese investors have a lot of relationships within communities that draw investments near various “Chinatowns” in core cities. 

“There is a bit of a herd mentality that is mostly based on referrals and confidence within the community, so you have concentrations in New York, Los Angeles, and San Francisco, but also markets like Vancouver, British Columbia,” he said. 

The possible growth of Chinese investors into a housing market that is already starving for inventory may not be ideal. The National Association of Realtors recently reported that total housing inventory, while up 2.2% in January 2020 from December 2019 to 1.42 million units, is the lowest inventory level recorded since 1999. 

Shapiro, however, said “we only benefit” from an influx of Chinese investors. 

“Now that the U.S. economy is stronger than ever including unemployment, growth, and stability, U.S. property is a flight to safety,” Shapiro said. “If we have some influx in certain markets this will only help absorb the product faster and continue to boost our real estate markets.”

Hale said Chinese buyers represent the largest share of foreign buyers of U.S. residential real estate. She also said they’ve faced headwinds in recent years from capital controls in addition to rising home prices. 

The epidemic is likely to hamper their ability to participate in U.S. real estate in the short-run, but it may lead to more interest in the long-run as buyers may seek to be more internationally diversified,” Hale said. 

Shapiro said concerns over home prices go back to supply and demand, but warned that growing home values could continue.  

With an influx of new buyers seeking flight to safety in the U.S., product will move quicker and will drive prices potentially higher, or at the very least, absorb any access that might be putting pressure on prices,” he said. 

Chris Marlin, President of Lennar International, told CNBC in an interview in June 2019 that foreign buyers are looking to the U.S. residential real estate market for long-term, stable investments. 

Marlin said the consumer behavior from Japanese buyers is showing a trend of moving away from yield and focused more on stability and self-use.

He added that while there has been a decline in interest from Chinese buyers in California, Chinese buyers are looking more into properties in Florida, Texas, and along the East Coast. Marlin added that Chinese interest in China is still evident, but they are moving away from high-priced homes. 

American Community Survey data produced by the U.S. Census Bureau and provided by realtor.com found that California led the nation in the Chinese-household population in 2017, with a reported population of 968,777 and 392,525 total Chinese households. California has a total foreign-household population of 10.6 million. 

The California metro of San Jose-Sunnyvale-Santa Clara led the nation in the highest share of Chinese households at 8.3%. Fellow Golden State areas—San Francisco-Oakland-Hayward and Los Angeles-Long Beach-Anaheim—followed with shares of 7.7% and 3.4%, respectively. 

The data also revealed that Florida’s 0.3% share of Chinese households was the lowest in the nation for areas providing numbers for both foreign-born and Chinese households. 

Pennsylvania and Texas’ share of 0.6% was the second-lowest in the nation for areas reporting both figures. 

Florida had a Chinese-household population of 70,901 in 2017 with 24,852 Chinese households. Mississippi's 24,904 foreign households were the lowest in the nation for those reporting data for both foreign-born and Chinese households. 

About Author: Mike Albanese

A graduate of the University of Alabama, Mike Albanese has worked for news publications since 2011 in Texas and Colorado. He has built a portfolio of more than 1,000 articles, covering city government, police and crime, business, sports, and is experienced in crafting engaging features and enterprise pieces. He spent time as the sports editor for the "Pilot Point Post-Signal," and has covered the DFW Metroplex for several years. He has also assisted with sports coverage and editing duties with the "Dallas Morning News" and "Denton Record-Chronicle" over the past several years.
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