The economic impact of coronavirus triggered a liquidity crisis that could force more Americans to unload their facilities. But what if there are no buyers?
New homes in the USA are listed at a discount.
Lack of liquidity may force more sellers to exhibit their properties at lower prices.
Uncertain times are ahead for the US housing market as coronavirus destroys the economy.
A new coronavirus pandemic is about to harm the US housing market. This can be seen from the latest Weiss Analytics report, which indicates a sharp decrease in the asking price for new homes.
Lower prices indicate potential failure
Weiss Analytics reports that 30% of homes priced at $ 200,000 or less were listed with an average discount of 6.3% compared to February. On the other hand, 37% of homes worth $ 600,000 or more were listed with an average discount of 7.7%.
The decline in prices coincides with the fall of new house listings. Zillow estimates that listings for luxury homes have fallen 46%. Affordable homes have seen a 32% drop in new listings.
According to Redfin, a real estate listing company, last month saw a sharp annual decline in home sales of 22.7%. At the same time, new listings fell 41% annually in April. Housing stock also declined by 21%.
Despite these obstacles, the average selling price rose 5% year on year to $ 304,000 over the course of a month. But this is not an indicator of long-term strength, as houses originally entered into sale in previous months would lead to higher prices.
The discount rate for new ads gives you a better idea of where the housing market is heading. Not surprisingly, sellers are offering big discounts in the coming months, as buying a home is becoming more difficult, despite low mortgage rates.
Prices will fall further
Bulls in the housing market believe that low mortgage rates in the United States will be a fair wind and will help attract buyers. But this is not so, as banks tighten lending criteria in light of the worsening employment scenario.
This caused fear among banks, which decided to withdraw certain financial products related to housing in the light of the employment crisis.
Declining employment prospects and a bleak macroeconomic environment could lead to an escape into liquidity. In this case, homeowners may be forced to put up their homes for sale in order to gain access to cash.
But obtaining a loan may not be easy, and the number of potential buyers may not be large enough due to poor employment conditions. As a result, sellers can compete with each other to unload real estate, which leads to higher discounts.
A recent drop in price list indicates that the US housing market may already have begun to fall. But this may be just the beginning, as the true impact of COVID-19 takes time to break out.