Covid-19 has lead to a whole host of economic issues from a large increase in unemployment, a decrease in consumer confidence and much of the economy has come to a grinding halt. If you were looking to capitalize through some housing purchases I have some bad news for you.
The median list price in the United States is actually rising it’s up around 1.4% year over year. However, home sales are down by 18% though which is also paired with a 7.4% increase in sale price over last year. Essentially this means that homes are being sold for quite a bit more even though far fewer of them are actually being sold.
Why Aren’t Prices Dropping?
Generally speaking home prices are up over the last five years and have been up since the 2008 financial crisis. This has been driven by an increase in demand for homes and relatively low supply. The low supply has been driven by low levels of housing construction and available land to build homes. This is why in many cities across the countries you’re seeing homes that were original a single home on a piece of land be split into two separate homes on the same lot. If you’re curious the easiest way to tell is if your home address has a letter so for example.
123 Example Street A and your neighbor might be 123 Example Street B.
Now, while usually a sharp decrease in demand leads to a decrease in list price we are also dealing with a sharp decrease in overall housing supply. Many home sellers pulled out of the market due to the uncertainty many of whom who might have been moving due to work might be furloughed. So, this has created an interesting anomaly in the overall housing market where you would expect prices to drop but haven’t. All of which is being driven by lack of participation on both ends as most people have simply pulled out of the market.
Overall, prices haven’t decreased due to not many buyers looking to buy, and many sellers simply pulling their listings. The two have basically cratered identically leading to very little changes in overall prices.