Before the COVID-19 pandemic changed everything, many experts predicted the U.S. would see a recession at some point in 2020. Following the end of the second quarter last year, the 2019 Zillow Home Price Expectations Survey reported that many of the surveyed economists, investment strategists and housing market analysts pointed to trade policy, stock market correction or geopolitical crisis as the likeliest causes.
Of course, no one foresaw a global pandemic as the cause of economic woes. Quarantines and shelter-in-place orders in the U.S. began in March, and companies have been forced to shift to work-from-home models as much as possible while customer-centric businesses are seeing far fewer patrons than is sustainable in the long term.
Even as states attempt to slowly open up for business, many people are still afraid to return to work, gather in large groups and patronize stores and restaurants in person. While homes have been bought and sold throughout the pandemic, housing market activity has dropped, leaving many people wondering how housing and the overall economy may be changed going forward.
Are We in a Recession Right Now?
A recession is a period of significant economic decline, often when a country’s gross domestic product is reduced for at least two successive quarters.
The National Bureau of Economic Research determines when a recession begins and ends, and those parameters are typically set after a recession has ended. In its determination, the NBER factors in indicators beyond real GDP and looks at monthly activity as opposed to complete quarters.
Economic forecasters at real estate information company Zillow and other firms predict that the U.S. is currently in a recession, explains Skylar Olsen, senior principal economist at Zillow. Still, a definitive answer as to whether we are in a recession and how long it will last can’t be known yet.
Unemployment’s Impact on Housing
The Bureau of Labor Statistics reports the national unemployment rate reached 14.7% in April, the worst unemployment rate since the Great Depression. Many states’ individual unemployment rates are the highest in history.
In a traditional recession, the housing market is temporarily affected by increased unemployment, with home prices decreasing slightly until buyers feel confident enough to resume house hunting. In this period of economic uncertainty, signs point to a similar reaction, though the sheer size of unemployment can drag out decline in the housing market.
If more states begin to open up and unemployment drops quickly as businesses are able to bring employees back from furloughs and rehire laid-off workers, the pandemic could register as a minor blip in homebuyer activity, homeowner confidence and home prices. But if high unemployment rates are prolonged, housing market activity is likely to remain low for longer, and more would-be buyers will put off their plans to purchase.
Employment plays a major part in your ability to qualify for a mortgage. If you were set to purchase a home but suddenly lost your job, your employment history no longer looks as secure. You may have to rely on the savings you had for a down payment to cover other expenses. In this scenario, Olsen says, the question becomes, “Does that reset your clock for buying a home another two years?”
Buyers and sellers don't have to wait till 2018 to be part of a home sale.
The Housing Market in the Near Future
While the housing market saw a major drop in activity when stay-at-home orders went into effect throughout the U.S., the good news is that home prices continue on an upward trend compared to last year. The National Association of Realtors reports that the median price for existing homes in April was $286,800, a 7.4% increase from April 2019. The number of sales of existing homes that closed in April, however, was 4.33 million, a 17.8% decline from March and a 17.2% drop from April 2019.
Buyers who remain financially secure are starting to shop for homes again. The American Enterprise Institute Housing Center reports that for the week of May 18, the volume of home purchase rate locks – or homebuyers locking in an interest rate to make an offer on a home – returned to pre-pandemic levels and is up 16% compared to the same week in 2019. Sellers, on the other hand, largely aren’t putting their homes on the market.
“Buyers might be showing up and they’re harvesting what’s out there, (but) we won’t see this continue unless we start seeing new listings,” Olsen says.
In the rental market, affordability concerns are strong, as these households are more likely to be harder hit by unemployment and less likely to have ample savings to fall back on.
Rental industry experts were pleasantly surprised that by May 20, 90.8% of apartment households in professionally managed rentals had paid at least partial rent for the month of May, according to the National Multifamily Housing Council’s Rent Payment Tracker. Only 89.2% of renters were able to make April’s rent by April 20.
NMHC President Doug Bibby points to legislative efforts that have made May a more successful month. The coronavirus relief bill resulted in a check of $1,200 to all Americans with an adjusted gross income of $75,000 or less and increased unemployment benefits by $600 per week for roughly four months. “A combination of the stimulus check and the unemployment benefits are helping people,” Bibby says.
Congress is currently weighing options for more financial relief, though who will benefit and how is not yet determined. Without additional government aid in the near future, Bibby expects rent payments to fall significantly if unemployment remains high. “It’s really getting into July and August that I become very nervous for prospects for renters,” he says.
Ultimately, renters' financial limits will likely keep rents from growing. “You’ll start to see rent coming down, but you’ll also see people seeking rent-saving strategies,” Olsen says. Such strategies include renters opting to move back in with their parents or living with additional roommates for a year or more to keep their housing affordable.
[Read: How to Buy a Foreclosed Home]
Homeowners and Renters Shouldn’t Worry If They Can Make Payments
For a typical homeowner or renter, the biggest concern should not be about what’s happening in the larger market, but their own ability to make monthly housing payments.
If local home prices drop and you find yourself underwater – meaning you owe more on your home than it is currently worth – the change in value should be minor and temporary. There is no reason to try to sell your home in a panic unless you can’t continue making existing payments.
Even then, your mortgage lender has likely offered options in recent weeks to help you avoid foreclosure if you find yourself without income. The coronavirus aid bill has additionally put a hold on foreclosure activity for federally backed mortgages through forbearance. When a mortgage is in forbearance, the lender will not pursue foreclosure proceedings for a set period of time, allowing the homeowner to suspend payments and potentially work with their lender to establish a new payment plan. In many cases, borrowers are able to extend the life of their loan by the number of payments skipped during forbearance.
In a recession, the number of foreclosures nationwide typically increases. However, the legislative measures and lender accommodations are helping stave off a widespread foreclosure problem while unemployment is so high. “The CARES Act being there in order to stop foreclosures, and to do forbearance – that’s how you get to the other side (of a recession),” Olsen says.
For renters and homeowners who are worried about making payments, communication is key. For landlords and lenders, flexibility when possible will help avoid a housing crisis. “People are going to have to work together to schedule a payment plan,” Bibby says.
Ensure a quick sale.
Selling your home quickly not only allows you to move on with your life, it also means fewer days of keeping your home in pristine condition and leaving every time your agent brings prospective buyers for a tour. According to real estate information company Zillow, the best time to list a home for sale is on a Saturday between May 1 and 15; homes listed during those times sell six days faster and for 0.7% more than the average annual home price. But how fast your home actually sells, and at what price, depends on factors beyond timing. Here are 10 secrets to selling your home faster, no matter when you list it.
Updated on March 20, 2020: This story was published at an earlier date and has been updated with new information.Pick a selling strategy.
Pick a selling strategy.
Before putting a for sale sign in your yard, it's important to pick the selling strategy that will work best for you. The for-sale-by-owner option may be best if you feel confident in your ability to market the home and negotiate. If your time is better spent on other details, a real estate agent could be best. If you need to sell the home quickly, you may want to inquire with an iBuyer, an entity that can make the deal close faster than the typical homebuyer. You should feel confident in the selling strategy you choose, and avoid switching from one to the other while your house is on the market. Buyers could be turned off by the constant changing of circumstances.Invest in a professional photographer.
Invest in a professional photographer.
According to NAR's 2019 Profile of Home Buyers and Sellers, 44% of recent buyers started their search online. Of those, 87% found photos very useful in their home search. If your listing photos don’t show off the features of your home, prospective buyers may reject it without even taking a tour or going to the open house. Hiring a professional photographer and posting at least 30 photos of your home, inside and out, is a good way to attract buyers. Photography is often free for home sellers, as shoots are often conducted at the expense of real estate brokers as part of marketing the property.Clean everything.
(People Images/ Getty Images)
Nothing turns off buyers like a dirty house. Hire a company to deep clean if you can’t do it yourself. “When the (home) is on the market, no matter what time of day or night, it should be clean and neat,” says Ellen Cohen, a licensed associate real estate broker with real estate brokerage Compass in New York City.
Key places to clean while your home is on the market include:
- Kitchen countertops.
- Inside cabinets and appliances.
- Floors and room corners where dust collects.
- Bathroom counters, toilets, tubs and showers.
- Inside closets.
- Windows, inside and out.
- Scuffed walls, baseboards and doors.
- Basement and garage.
Depersonalize the home.
Remove all your family photos and memorabilia. You want buyers to see the house as a home for their family, not yours. Remove political and religious items, your children’s artwork (and everything else) from the refrigerator and anything that marks the house as your territory rather than neutral territory. The same goes for any collections such as figurines, sports memorabilia or kids' toys that can make a buyer think less about the house and more about you. Family photos can be replaced by neutral art or removed entirely – just be sure to remove any nails and repair nail holes where any hanging photos used to be.Let the light in.
Let the light in.
People love light and bright, and the best way to show off your house is to let the sunshine in. Open all the curtains, blinds and shades, and turn lights on in any dark rooms. If the natural light situation is lacking in any room, strategically place lamps or light sources throughout to set the mood. And while your house is on the market, open all curtains and turn on lights every time you leave your house for work or errands in case you get word that a buyer would like to tour the space before you get home.Be flexible with showings.
Be flexible with showings.
Buyers like to see homes on their schedule, which often means evenings and weekends. Plus, they want to be able to tour a home soon after they find it online, especially in a hot market where they're competing with other buyers. If your home can be shown with little or no notice, more prospective buyers will see it. If you require 24 hours’ notice, they may choose to skip your home altogether. "That's one less person who gets to see the property," Cohen says. Be ready to leave quickly as well – if you're still cleaning up or hanging around outside when the buyer arrives, it can make for an awkward interaction.Set the right price.
Set the right price.
No seller wants to leave money on the table, but the strategy of setting an unrealistically high price with the idea that you can come down later doesn’t work in real estate. Buyers and their agents have access to more information on comparable homes than ever, and they know what most homes are worth before viewing them. A home that’s overpriced in the beginning tends to stay on the market longer, even after the price is cut, because buyers think there must be something wrong with it. "Pricing correctly on the lower side tends to work much better," Cohen says.Remove excess furniture and clutter.
Remove excess furniture and clutter.
Nothing makes a home seem smaller than too much big furniture. Rent a self-storage container or a storage unit and remove as much furniture as you can. It will immediately make your home seem calmer and larger. Remove knickknacks from all surfaces, pack them away and store the pieces upon which you displayed them. Take a minimalist approach to books, throw rugs and draperies, and clear off your kitchen and bathroom countertops, even removing appliances you normally use. If you can scale down the contents of your closets, that’s even better, because it makes the home's storage space look more ample.Repaint in neutral colors.
Repaint in neutral colors.
A new coat of paint will do wonders to freshen up your home, both inside and out. This is the time to paint over your daughter’s purple bedroom, nix the quirky turquoise bathroom and cover up the red accent wall in your dining room. Busy wallpaper can also turn off potential buyers. Your goal is to create a neutral palette so buyers can envision incorporating their own personal touches in the home. "You just want people to see the space for what it is," Cohen says. Rather than a stark white, consider neutral shades of gray, taupe and cream on the walls.Spruce up the front of your home.
Spruce up the front of your home.
You’ve heard it 100 times before, and it’s still true: Curb appeal matters. You don’t get a second chance to make a first impression. A new or freshly painted front door, new house numbers and a new mailbox can breathe life into your entryway. Fresh landscaping and flowers in beds or in pots also enhance your home’s first impression. Trim trees and bushes, tidy up flower beds, remove dead leaves from plants, clear out cobwebs from nooks near the entrance and pressure-wash walkways, patios and decks. Leave the outdoor lights on, too, because prospective buyers may drive by at night.Here are 10 tips to sell your home faster:
Here are 10 tips to sell your home faster:
- Pick a selling strategy.
- Invest in a professional photographer.
- Clean everything.
- Depersonalize the home.
- Let the light in.
- Be flexible with showings.
- Set the right price.
- Remove excess furniture and clutter.
- Repaint in neutral colors.
- Spruce up the front of your home.
See more Real Estate slideshows:
Updated on May 28, 2020: This story was published at an earlier date and has been updated with new information.
She has appeared in media interviews across the U.S. including National Public Radio, WTOP (Washington, D.C.) and KOH (Reno, Nevada) and various print publications, as well as having served on panels discussing real estate development, city planning policy and homebuilding.
Previously, she served as a researcher of commercial real estate transactions and information, and is currently a member of the National Association of Real Estate Editors. Thorsby studied Political Science at the University of Michigan, where she also served as a news reporter and editor for the student newspaper The Michigan Daily. Follow her on Twitter or write to her at email@example.com.