Housing USA: The Housing Market in the Age of Coronavirus

6 min read

There are plenty of things for people to worry about from coronavirus: the health of themselves and their family; the wellbeing of medical workers; and the economic impact of a prolonged shutdown. The housing market may not be a primary concern, but it’s still serious – a collapse in home prices and construction activity could tank municipal tax receipts, worsen already-high unemployment, bankrupt developers and compromise financial markets.

A sub-level concern is the affordable housing industry, which plays by slightly different rules. If the pandemic worsens, how will it affect state-level bond caps, Low Income Housing Tax Credit allocations and the desirability of four and nine percent credits to investors? How will management of affordable housing projects change, with new protocols in place about social distancing, workplace safety and rent payment obligations?

Recently, I’ve read and spoken with people who are immersed in these questions, to examine possible scenarios.

The broader housing market
One way to grasp the housing market’s current health is to view the immense real estate info coming from Redfin’s Data Center. Right now in the U.S., things don’t look totally horrible.

Home listings plummeted by nearly 50 percent from early March to mid-April, but have steadily ticked back up, and by May 7 were at 72,000, 78 percent of their pre-COVID figure. Median listing prices also sunk dramatically along this timeline, but are now back to $322,000, which is close to normal. The same goes for home sales.

Issi Romem, a Fellow at the Terner Center for Housing Innovation at U.C. Berkeley, says this actually isn’t surprising for a pandemic. People aren’t putting homes on the market due to the health risks of giving tours and the prospect of selling at lower prices. So, inventory levels and home prices remain stable.

The bigger question is how the market will look months or a year from now, when we may have endured an extended period of high unemployment, low consumption and poor investor confidence.

Zillow wrote a report that describes three separate scenarios.

The optimistic scenario is positive home growth in Q4 (back to 90 percent levels of Q4 2019), and a one to two percent home price dip, before recovering in 2021. Zillow’s pessimistic scenario is a “short-term recession, reflecting slower reopening, a possible second wave [of coronavirus], and/or stronger economic spillovers.” The anticipated price drop would be three to four percent and continue through 2021. The medium scenario is a short-term recession and two to three percent price drops. Romem had a similar view as Zillow, viewing coronavirus as something that might hurt the housing market slightly, but not destroy it.

“In past pandemics, such as SARS in Hong Kong, there was a freeze period,” he says. “Then once things were back to normal, housing prices picked up where they left off. That could be the case now.”

Other commentary has taken a doomsday tone, but I’ve found it comes more from pundits than analysts actually viewing the data (one example was celebrity historian Niall Ferguson, who asked on Twitter, “Is this the end of the megalopolis?”).

One of their common talking points is that dense cities like New York will be less desirable since they may be more prone to infectious disease. But again, the data shows that, like elsewhere in the country, New York’s home sales, listings and median prices are rebounding despite dropping dramatically in March.

The affordable housing market
The segment of the market that may get hit worse is rentals, which may include affordable housing rentals.

Romem noted that homeownership caters more to wealthier demographics, who haven’t been as financially hurt by coronavirus since they more often work remotely.Maybe that’s one reason the sales market remains relatively unchanged, and why some impending crash or mortgage meltdown seems doubtful.

But renting caters more to low-income demographics who’ve been financially hit by coronavirus. (It should be noted that dense U.S. cities have higher percentages of renters, which may cause their recoveries to be slower).

It’s not that the need for apartments has declined amid coronavirus; but demand, in the technical sense, has declined. People are unemployed and earning less. Their stimulus checks have been late to arrive or inadequate at covering their needs. And now there are calls for a “rent strike,” with some federal legislators trying to make that policy into law. This could all present major cash flow problems for landlords, who could potentially default on their mortgages, or developers, who will see less of an incentive to build new apartments.

Production could be even more tenuous for multifamily rentals that fit specifically in the affordable housing policy space. A lack of tax receipts into local, state and federal coffers will reduce the amount of money going for different housing programs—including LIHTC—denying developers of the financing they’d use to complete affordable housing projects. Even when credits are allocated, they may not sell for as much. As Richelle Patton, founder of Collaborative Housing Solutions, a BMR consultant and developer in Georgia, explains, “Many syndicators and investors are on the sidelines waiting to see what will happen in terms of investor appetite for tax credits. They’re making less money, so of course their tax liability will be less. The demand for sheltering income through tax credits will very likely go down. So what does that mean then for pricing?”

Another negative factor, she says, is that project costs could go up, as developers and managers must deal with COVID-related measures, like social distancing for workers, late rent payments, supply chain issues and other things that make project execution more complicated.


       The ultimate effect coronavirus has on the housing market—for single-family or multifamily, buying or renting and market-rate or affordable—depends on factors beyond the industry’s control.

One factor is how contagious and deadly the virus itself becomes. The other will be how governments respond. There’s an ongoing debate on whether to reopen or continue closing the economy, with politicians balancing health versus business interests. It’s a debate that, in true federalist style, is now being tested differently across 50 states. The decisions these governors make will determine how quickly the economy rebounds, which in hand will determine the same for the housing market. Right now, it’s anyone’s guess.

Story Contacts:
Issi Romem
Fellow, Terner Center for Housing Innovation at U.C. Berkeley

Richelle Patton
Founder, Collaborative Housing Solutions