Despite downturns in many industries as a result of COVID-19’s spread, home sales remain strong. While fears of an impending recession loom, people continue to purchase new homes.
Most of the economy exhibits symptoms of strain as a result of the novel coronavirus that first grabbed headlines last year. Likely born from a food market in the Chinese city of Wuhan, COVID-19 since spread across the globe. Presently, cases total nearly 180,000. 7,100 people died from their infections, the majority of them either elderly or struggling with underlying illness.
So far, the United States diagnosed 4,243 confirmed cases of COVID-19. In response, quarantines and municipal bans on gatherings of a certain size seek to stem the spread. As a result, workers and businesses face an economic hit. In Los Angeles, Mayor Eric Garcetti issued an executive order closing restaurants, bars, and movie theaters among other commercial businesses through the end of the month. The stock market plunged last week and continues to exhibit signs of a coming recession.
Yet, despite these impacts, home sales show strong numbers.
Homes Sales High From Low Interest Rates
The biggest factor influencing the home sales market comes from mortgage rates. To combat a potential recession, the Fed lowered interest rates. As a result, interest rates across the lending industry hold low positions. Mortgage lending is no exception. With some of the lowest rates in years, buyers benefit from favorable loan terms. Lower interest rates mean borrowers need less money for a down payment, making home sales more feasible.
However, the strong home sales number may curb as COVID-19 drags on.
President Trump suggested in a news conference on Monday the outbreak may remain a serious concern through the summer. While the outlook remains uncertain, he mentioned July or possibly August as the end of the outbreak’s grip on the country.
If the novel coronavirus continues to impact the economy for several months, some homebuyers may become unable to make mortgage payments. Layoffs and reduced hours could overshadow low interest rates to impact home sales as the outbreak drags on.