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What Impact Might COVID-19 Have on Home Values?

Randal Engelmann & Erik Gould

We are Randal Engelmann and Erik Gould, partners in providing exceptional customer service...

We are Randal Engelmann and Erik Gould, partners in providing exceptional customer service...

Apr 28 4 minutes read


What Impact Might COVID-19 Have on Home Values?


A big challenge facing the housing industry is determining what impact the current pandemic may have on home values. Some buyers are hoping for major price reductions because the health crisis is straining the economy.

The price of any item, however, is determined by supply and demand, which is how many items are available in relation to how many consumers want to buy that item

In residential real estate, the measurement used to decipher that ratio is called months supply of inventory. A normal market would have 6-7 months of inventory. Anything over seven months would be considered a buyers' market, with downward pressure on prices. Anything under six months would indicate a sellers' market, which would put upward pressure on prices.

In Boston right now we have 1.93 months supply of condos available. 1 year ago we had 2.48 month’s supply. 

Single Family inventory is even tighter with 1.23 months supply currently, compared to 1.64 months supply 1 year ago.


Thus the Boston housing remains a strong seller's market. This is consistent in that we are seeing most homes sell quickly and many still selling with multiple offers. 

In addition, research completed by John Burns Real Estate Consulting, which recently reported that historical analysis showed us that pandemics are usually V-shaped (sharp recessions that recover quickly enough to provide little damage to home prices).

What are the experts saying?

Here's a look at what some experts recently reported on the matter:

Ivy Zelman, President, Zelman & Associates

Supported by our analysis of home price dynamics through cycles and other periods of economic and housing disruption, we expect home price appreciation to decelerate from current levels in 2020, though easily remain in positive territory year over year given the beneficial factors of record-low inventories & a historically-low interest rate environment.

Freddie Mac

The fiscal stimulus provided by the CARES Act will mute the impact that the economic shock has on house prices. Additionally, forbearance and foreclosure mitigation programs will limit the fire sale contagion effect on house prices. We forecast house prices to fall 0.5 percentage points over the next four quarters. Two forces prevent a collapse in house prices. First, as we indicated in our earlier research report, U.S. housing markets face a large supply deficit. Second, population growth and pent up household formations provide a tailwind to housing demand. Price growth accelerates back towards a long-run trend of between 2 and 3% per year.

Mark Fleming, Chief Economist, First American

The housing supply remains at historically low levels, so house price growth is likely to slow, but it's unlikely to go negative.

Bottom Line

Even though the economy has been placed on pause, there is still stronger buyer demand than there is supply of housing, maintaining the ongoing housing inventory shortage in Boston. Thus it is most likely that home prices will remain steady and possibly even retain maintain modest gains throughout the pandemic and most likely well beyond.

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