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?.”
