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The Chester Realty Group LLC

  • Home
  • Property Types
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    • First Time Home Buyers
      • Homeownership & Credit Counseling Workshop
      • Ready to become a homeowner
    • Credit Restoration
  • Sale-4-Cash Now
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    • List-to-Rent
  • Avoid Foreclosure
  • Relocate
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Impact of COVID-19 on Real Estate

By

Chester Realty Group

Posted in Uncategorized On July 20, 2020

COVID-19 is singularly the largest threat to the United States real estate industry since the 2008 financial crisis over a decade ago. Florida’s housing market in May continued to indicate the economic impact of the coronavirus pandemic that shut down businesses and roiled the global economy. While the latest housing data reported lower levels of closed sales and new listings compared to a year ago, median sales price increased and new pending sales for single-family existing homes rose 2.3% compared to a year ago which is a positive sign for the housing sector.

Low Mortgage Rates

Housing demand continues to be driven by record-low mortgage rates that show no signs of rising any time soon. June is going to be a very strong month for sales given the high levels of demand that have been released in recent weeks. Credit remains tight, but there is some evidence that it’s loosened up as compared to where we were in April, as lenders have incorporated new information about the performance of the economy. 

Leon, Broward, Orange Counties at Risk in Era of COVID-19

Broward, Orange, and Leon counties are the most overvalued for housing among Florida markets and run the greatest risk of cost declines from COVID-19. In Broward, Orange, and Leon, COVID-19 is like a hurricane waiting to hit. It’s best to let the pandemic pass before trying to sell or buy property.

If COVID-19 passes quickly, the impact could be minimal. If it lasts for months, housing markets in Florida will see significant retrenchments. During the housing collapse of 2006-2011, homes in Florida and other markets nationwide lost half or more of the values. Investors acquiring properties at deep discounts to resell, renovate or rent launched an extended housing boom that was starting to soften even before COVID-19.

COVID-19 AND HOUSING CONCERNS

Emerging questions in Florida rotate around the status of its housing market. Of particular interest at this time due to COVID-19, is housing prices. Are prices too low, too high, or stable given the fundamentals of the marketplace and the threat of COVID-19 on housing markets? Evidence from ongoing research suggests that in six of the state’s most populous counties Leon County (home to the state’s capital)  as well as (Miami-Dade, Broward, Palm Beach, Orange, Hillsborough and Duval), houses are overpriced relative to their fundamental valuation with noticeable to significant downward pressure on housing costs.

COVID-19 TURNING VACANT HOMES INTO REAL ESTATE DARLINGS

Vacant homes, long considered a drag on the Florida real estate market, are getting an image makeover courtesy of the coronavirus crisis. Vacant properties have sold at a discount due to poor conditions and the financial distress of the owners, who want to minimize financial losses and sell quickly. But the spread of COVID-19 makes this one of the best times ever to sell unoccupied homes. With nobody living there, these houses offer a reduced risk of exposure to the virus, so serious buyers are more willing to tour the properties and make offers close to market value.

Renting

Renting is more favorable than buying in South Florida because the prices of homeownership are accelerating faster than renting. Even with houses overvalued and the pandemic pushing unemployment levels above 10 percent, property buyers remain in the market because of mortgage rates near 3 percent or lower. 

Consumers Should Be Careful

Florida homes are overvalued by 20 percent, although record-low interest rates in eight years still drive demand despite a once-in-a-century pandemic that could strike the market. COVID-19 does not appear to be slowing the population growth as households relocate from states that are less-friendly to businesses and have higher taxes.

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