The COVID-19 pandemic has us all a bit confused. On the one hand, you have medical emergencies and country-wide measures issued to keep it at bay. On the other, you have a large recession caused by months of isolation and quarantine. Now, trying to cover these complex subjects within a single article is impossible. So, to help understand this situation a bit better, we are going to take a closer look at how recession will impact real estate in 2020. This should shine a bit of light on one of the effects of the coronavirus and help us better understand the crazy times we are living in.
Understanding the current recession
To understand the recession impact on real estate in 2020, we first need to take a look at the recession itself. After all, the real estate market is influenced by numerous other markets, which is why real estate agents have trouble adapting to COVID-19 circumstances. So, we cannot properly consider it without first taking a look at the overall effects of COVID-19.
The effects of COVID-19
Ever since the coronavirus pandemic started, the world has been in a state of continual lockdown. First countries started limiting travel and trying to figure out more lenient ways to fight the coronavirus. But most countries decided that more strict measures were necessary and that economic effects had to be put on the backburner. While this has helped us keep COVID-19 at a relatively manageable level, the economy has suffered greatly. The lack of trade has led to a considerable amount of layoffs. So much so that 22 million Americans have filed for unemployment benefits since the coronavirus started. Now, there are certain signs that the economy will start picking up. But if there is one thing we can say for sure, it's that this recession will stay with us for a considerable amount of time.
The recession impact on real estate in 2020
So, how will recession impact real estate in 2020? Well, there are a couple of notable ways that the current recession will affect real estate. You might expect that the lack of trade will lead to a decrease in overall real estate prices, be it rent or purchase. But, as you will soon learn, the true effects of the recession are a bit more complicated to unpack.
Renting prices are experiencing a downward trend. While the full drop of rent prices has not yet come in effect, there are telltale signs that rents are going to drop significantly. This is properly due to a lot of people losing jobs or working for a fraction of their former pay. Because of this, they are not able to afford the apartments they previously rented and some of them are even moving to a more affordable state. So, this leaves landlords with two options. They can either:
• Evict the current tenants and look for ones that can afford them.
• Reduce the rent price to something more affordable.
And seeing that relocation and travel are still difficult and that the job market is in decline, the second option is usually the smarter one.
Selling and buying
So far, the buying prices of real estate have remained pretty much the same. Be it homes, apartments, or lofts, the prices are holding steady. True, there has been a slight decrease in the price of commercial real estate. But, this is only in certain areas, and not in any significant degree. People are turning away from luxury homes. But how much of this is due to COVID-19 is discussable.
Another notable recession impact on real estate in 2020 will be in commercial space. Numerous companies are going out of business, which means that a lot of commercial space will free up. And seeing that no one is crazy enough to open up a business during the recession, most of those spaces will remain without a tenant. This will definitely lead to a substantial decrease in price, at least until the recession is over. So, if you plan on opening a business after the recession, pick a commercial space now and keep a close eye on it. To find out how to prepare for commercial relocation, keep on reading on vanexpressnj.com.
Travel industry and real estate
One of the bigger factors we need to consider is the travel industry and the real estate related to it. The travel industry has taken a major hit due to the COVID-19 pandemic. Just consider the fact that most summer vacations have been canceled. And, as a result, the price of real estate in tourist areas is declining. Beach home, vacation properties, and especially summer rental homes are going to be quite cheap in the near future.
Final thoughts about real estate in 2020
As of writing this article, the coronavirus is at a seemingly downward trend. Some countries like Russia and Brazil are still battling it, but Europe and the U.S. are slowly starting to recover. Now, the important thing to mention is that this is only the first wave. If the Spanish flu, Asian flu, and the Hong Kong flu have taught us anything, it's that these things come in waves. And, unfortunately, the second wave has usually been the most deadly. So, while it is good for the overall economy that the countries are trying to boost, we are far from being free of COVID-19. If you are a betting person, expect that we'll see at least one more wave of quarantine, a ban on travel, and an economic decrease in 2020.
How will real estate further develop in 2020?
While real estate is connected to different economies, it can be slow to react to changes in them. So, the current trend of steady prices may change if the recession lasts. If you are looking for advice on what to do, we would advise against making any considerable investments. How the recession will impact real estate in 2020 is difficult to predict, to say the least. So, if you are not absolutely certain about purchasing a piece of real estate, we would advise that you wait a bit before doing anything with it.
Written by: Lisa Robert with US Moving Experts