Lower Interest Rates vs. Economic Uncertainty

How will coronavirus affect the housing market?

The answer likely depends on two questions: 1) which Buyers?; and 2) which segment(s) of the housing market — specifically, which price points?

So, at the lower end of the market, especially in the Twin Cities, there remains an acute shortage of inventory.

That, plus the plunge in interest rates (= increased affordability), likely ensures continued housing market strength — at least in the short run.

Wealth Effect

I see more of a chilling effect on upper bracket housing.

That’s because what economists call “the wealth effect” looms larger for luxury home buyers.

With the stock market suddenly down 20% from its mid-February highs, such Buyers are feeling less sanguine about the future — and less inclined to make a major financial commitment now.

In the mean time, I think there’s one immediate, obvious consequence: a marked drop in open house traffic (assuming Sellers and listing agents choose to hold them) . . .

See also, “Free Mortgages! Git Your Free Mortgage!!”; “Counting Open House Traffic“; and “Can I Hold Your New Listing Open?.”

About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.

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