Fears over the coronavirus have struck fear into investors and rattled financial markets across the world. And with 103 confirmed cases in the U.S. as of Tuesday, there are worries that the near-pandemic will likely impact housing markets too.
So far, coronavirus fears have already resulted in mortgage rates falling, as investors are pulling money from stocks and putting it into safer U.S. Treasury bonds. And when bonds perform well, mortgage rates traditionally fall, realtor.com noted.
National Association of Realtors Chief Economist Lawrence Yun told realtor.com that while the coronavirus might affect sales in some markets, the low mortgage rates are likely to entice more buyers and sellers.
“Mortgage rates likely will fall to an all-time low, and buyers will want to lock in, even with growing economic concerns,” Yun said. “But expect far fewer international buyers because of travel concerns.”
However, others said the situation with the stock market is a concern.
“People don’t make big decisions in a vacuum, and buying a home is a big one,” said Danielle Hale, realtor.com’s chief economist. “If the stock market is flashing a sign that an economic slowdown is on the way, that’s when Main Street will feel it. And it could lead to a slowdown in home sales.”
The most vulnerable segment of the market could be the luxury home sector, as wealthier buyers tend to have more money invested in stocks. And if they’re feeling less wealthy, that makes them less likely to splurge on a new home, Hale said.
Still, the shortfall of wealthy and foreign buyers could be made up by those who’re enticed by the lower mortgage rates. Last week, the NAR reported that contract signings in January were up 5.2% compared to the month before, and up 5.7% from a year ago. The 30-year fixed-rate mortgage fell to 3.45% last Thursday, Freddie Mac reported.
“Buyers right now are trying to juggle whether or not they should jump in when mortgage rates are this low,” said Ali Wolf, director of economic research at Meyers Research. “What looks like a home that’s out of reach may actually be very affordable on a monthly payment schedule.”
Low mortgage rates could cause a boost in home sales in the short term, Hale said, but it depends on how much the virus continues to spread in the U.S.
“At the very least, the coronavirus could cause some people to put home sales on hold,” Hale said.