The Coronavirus Is Quietly Killing the Real Estate Industry

March 25, 2020 Topic: Economics Blog Brand: The Buzz Tags: EconomicsCoronavirusHealthReal Estate

The Coronavirus Is Quietly Killing the Real Estate Industry

But unlike in the Great Recession, there exists the promise of stability. Once the coronavirus has done its damage the supply chains will return and the market will recover. Unfortunately, it is impossible to know if the wild ride that the real estate industry is preparing to take will drop sharply and then lead into a strong upswing in the second half of this year.

The coronavirus is quietly killing the real estate industry. In the end, it will be yet another victim of a market that wasn't built to withstand a major economic shutdown—and certainly not a months-long economic shutdown that would strip them of the customer base that keeps them alive.

 

First, the restaurants and bars shuddered their doors. Then, little by little, small businesses began to die beneath the weight of pandemic panic. The invisible enemy could be anywhere, and so the government responded to its tricky presence accordingly. But such strict restrictions are creating a real estate crisis. And this is a crisis that will play out differently in various parts of the United States, according to Forbes.

The impact of the coronavirus crisis will vary from state to state and city to city. States that cater to tourists via hotels, entertainment venues, and cruises will be hit in two different ways. First, there is a concern about contamination. These high-traffic venues are often shared by various people who could or could not be carrying the virus. Second, economic instability driven by a loss of income will reduce the number of tourists who flock to those states in a time of certainty and cashflow.

States with economies that center around the oil market will also absorb a shock from the collapse of oil prices.

Homebuilders might be seeing a bit of a cushion from the chaos because their industry is not contingent upon consumers consistently buying food and fancy drinks. That said, some builders have reported a disruption in their supply chain due to coronavirus concerns.

Then there's the rental apartment industry. Hundreds of thousands of people have lost their jobs and have been asked to hide at home while the country careens toward economic collapse.

The pandemic is shaking high-level market forces and the ground-up process of buying and selling property. In addition to that chaos, policy problems have entered the picture. The Federal Reserve Board is leaning toward unlimited quantitative easing, which means it could soon be buying large sums of commercial mortgage-backed securities, according to Forbes. Plus, the threat of a recession looms.

But unlike in the Great Recession, there exists the promise of stability. Once the coronavirus has done its damage the supply chains will return and the market will recover. Unfortunately, it is impossible to know if the wild ride that the real estate industry is preparing to take will drop sharply and then lead into a strong upswing in the second half of this year.

Still, all indications seem to point toward a future where the real estate industry is fully functioning again.

Maggie Ybarra is a senior editor at the National Interest.