Should You Buy or Sell a House During the Pandemic?

In an economy hit hard by the COVID-19 pandemic, impacts to the housing market aren’t cut-and-dried. Demand for homes appeared to drop along with sales in March, but home prices have risen.

What does this mean for the average homebuyer or seller?

Gary Pivo, a professor of real estate development and urban planning in the College of Architecture, Planning and Landscape Architecture, is a widely cited expert on responsible property investing and sustainable urbanization.

Pivo talked to UANews about how COVID-19 might impact the number of homes for sale and sale prices, and whether the pandemic will encourage people to move to less dense areas. He also offered advice for those interested in buying or selling now.

Q: How has the pandemic affected the time houses spend on the market?

A: There is anecdotal evidence that things are selling more slowly. There’s been a decrease in existing home sales. Historically, there’s a strong negative correlation between time on market and home sales. So, the drop in sales would normally increase time on the market. Also, median months on the sales market for newly completed homes increases during recessions. But some of the drop in sales is from a shrinking market – a decline in both the number of buyers and sellers. So, if there remains some balance between the two, time on the market may not be greatly affected. 

Q: People like to look at the 2008 financial crisis when they think about the effects of the pandemic on real estate. Is it a fair comparison?

A: That was a crisis in our financial system that made it harder to get mortgages. So far, lending policies have remained unchanged, so that’s a key difference. Damage to household wealth did occur then and is happening now and that will weaken demand for housing, but low interest rates will offset that to some degree. But people with uncertain job prospects don’t want to buy houses. Still, on net, I do not expect a downturn in housing prices anything like the 24% drop we saw during the financial crisis. Commercial real estate may see bigger effects, particularly Class B and C retail and office space, if small businesses close, which seems quite possible.   

Q: How likely is it that lenders change their loan criteria for mortgages in the face of the economic effects of COVID-19?

A: As of April 2020, the Senior Loan Officer Opinion Survey on Bank Lending Practices by the Federal Reserve shows lending policies for mortgages have remained basically unchanged, according to 91.1% of the respondents. 

Q: The housing market in Tucson was steadily growing before the pandemic. How has COVID-19 changed that?

A: Financial stress on households should weaken demand, eventually pushing downward the 7% annual growth in housing prices we’ve seen the past two years. I expect to see total returns on investment in the private student housing market in Tucson and elsewhere to crater during the second quarter and that could extend through the year depending on how many…