The coronavirus pandemic is causing massive concerns across many different aspects of the world’s economy. Many economists believe that the coronavirus is causing the United States to go into a recession, as unemployment continues to rise every day. Of course, any impact to the country’s economy directly affects the housing market.
Ten percent of mortgage holders in the U.S. believed it was likely they would face foreclosure in 2018. Today, that percentage may be even higher.
If you have been looking to sell or buy a house, this might be a cause for concern. Let’s examine how the coronavirus will affect Denver’s housing market.
People Are Putting Their Moves on Hold
Understandably, many people are having concerns about moving during a global pandemic. The coronavirus is an incredibly contagious disease, and moving requires one to come into contact with many people. This includes realtors, sellers, moving contractors, and whomever else might be involved in the moving process. Moving to an entirely new home introduces the new homeowners to an array of germs and bacteria that could be avoided if they stayed home in quarantine. Many people may choose to avoid this risk and have decided to move after the pandemic, if possible. If moving is at all avoidable, then many people feel that the best way to protect the health of their family is to delay moving.
Another reason to delay a move would be because of a lack of job security. With many jobs reducing their workforce, many people feel concerned about the potential of losing their jobs. Purchasing a home is a huge financial commitment, which simply feels too risky to those that are concerned about losing control of their finances. Therefore, the buyer’s market may be reduced to those who are certain that their jobs are here to stay. Single-family home sales have dropped 20.4% statewide, with townhomes and condos falling even lower.
Urban Communities Are Less Appealing
As you may know, social distancing is putting a huge damper on social activities. Much of the appeal of an urban community such as Denver is the ability to meet people at a variety of restaurants, parks, clubs, and other social settings. With many of these social settings indefinitely closed, moving to the metropolitan parts of Denver might sound less appealing. Without the social benefits of being in a city, Denver loses a lot of its charm.
Although Denver has plenty of suburban areas as well, the metropolitan area houses a large portion of Denver residents. In fact, Denver’s metropolitan area houses more than 3 million residents alone. Unfortunately, the more urban areas of Denver might experience a slow of housing purchases until the coronavirus pandemic experiences a definitive reduction in new cases. For sellers, this can be disastrous. In a seller’s market, well-priced housing can be sold in three to 10 days. In a buyer’s market, selling could take upward of a month.
These hesitations are already showing in statistical evaluations. Just 11% of homeowners have sold their properties For Sale by Owner. However, this drop is not just a result of buyers’ hesitations. Single-family home listings have seen a reduction of 24.1% in April, with townhomes and condos falling even further. These statistics may cause even more buyers and sellers hesitations, preventing them from pursuing the market in the near future.
Working From Home Is Causing a Reevaluation of Commercial Spaces
Much of the real estate market is dependent on the leasing and selling of commercial spaces for businesses. The stay-at-home orders put in place by the coronavirus pandemic is causing businesses to take an investigative look at the necessity of business spaces. Some businesses are looking at this working from home as an experiment to see if the productivity of employees remains similar or the same despite not working in an office space. If productivity does not decrease significantly, businesses may find that paying for an office space may not be worth the money.
Fortunately, Denver actually has the third-highest rate of employees working from home, so it will not be as affected by this change as other cities. However, it is likely that the transition, if it occurs, will still have an effect on Denver’s housing market.
Affordable Housing May Become Rare
In a coronavirus-stricken housing market, both buyers and sellers are rightfully hesitant. From a seller’s perspective, the two-month period it typically takes to sell a house under good conditions may be significantly lengthened. Therefore, many sellers have decided to hold off and wait on selling if at all possible.
This, in turn, can have detrimental effects for those looking for affordable housing. Even before the coronavirus pandemic, affordable housing could be difficult to find. With this reduction in listings, many people may be unable to find housing that fits their budget, reducing the number of moves and negatively impacting the housing market even more.
There Is Potential for Recovery
Despite these concerns, many housing market experts hold out hope for Denver. One of the benefits of the housing market in Denver is that it has both a well-developed urban and suburban community. Therefore, the reduction in sales in more urban areas may not affect Denver as significantly. In addition, Denver’s economy is expected to be resilient during recovery, and housing prices may not drop as much of the rest of the country. This is positive for sellers, but not necessarily for buyers hoping to snag a house during the recession for a cheap price.
Like the rest of the country, Denver is experiencing negative impacts from the coronavirus pandemic. The housing market is no exception, and will likely take a hit from the recession. However, markets generally experience both downturns and upturns over the years, and it is incredibly likely that the housing market will recover as the pandemic slows.