The state of our world seems to be changing daily. We are all concerned about the rapid spread of COVID-19 and a looming recession. As we look forward, many people are worried about the real estate market and the impact on their home’s value. While none of us have a crystal ball and the future is uncertain, we want to offer a few insights into how COVID-19 may affect Bozeman’s real estate market.
The corona pandemic has hit the U.S just as we head into the busiest real estate season of the year. As of right now, we are still seeing a steady number of homes being listed for sale and are still seeing properties go under contract, although that number is lower than expected for this time of year. Click here for a Bozeman real estate market report.
Will there be buyers for these homes?
While the coronavirus has already financially impacted millions of people, there are still many industries & professions that have not been deeply affected, yet. For those who still have a steady income, the incredibly low mortgage rates are appealing. As we can tell at this moment, home values are not being negatively affected. But we are in the very early stages and things are changing quickly.
You may have heard that the federal funds rate has been dropped to 0-.25%. This cut was made in an attempt to stimulate the economy, but it does not mean that mortgage rates will follow. According to an article by Inman News, Ruben Gonzales, the Chief Economist at Keller Williams was quoted saying “It is also important to note that a federal funds rate near 0% does not dictate a further drop in mortgage rates. As the perceived risk towards people’s ability to pay increases, we will see the spread between the 10-year Treasury and the 30-year mortgage increase. Meaning that we could see 10-year Treasury rates go down, and mortgage rates go up.”
Will home values stay steady?
For those who will continue to have a steady income through this pandemic, buying a home now will mean extremely low mortgage rates and potentially less competition in what has been a very competitive market. As for home values, it may be that the low mortgage rates will keep demand high enough to support our existing home values. If the financially stable home buyers continue their home search driven by the low mortgage rates and the supply of homes on the market remains low, this may keep Bozeman’s home prices relatively steady.
Will the COVID-19 pandemic be like the 2008 Great Recession?
The current state of the financial market has us all flashing back to the Great Recession of 2008 and wondering if history will repeat itself. But, it's important to recognize that there are many differences between what is happening now and what happened then. The 2008 recession was triggered by subprime mortgage lending and excessive risk-taking in the financial industry and resulted in a banking crisis and loss of housing wealth. This time around, we are facing a recession that is triggered by a direct loss of income for people and businesses in certain industries. While there is legitimate concern that this will quickly trickle over to other people and industries not directly affected by the virus, the hope is that the business closures and loss of income will be relatively brief and the real estate industry will be able to recover quickly.
We are in the middle of a very strange time for our community, nation, and world. Nothing at the moment is guaranteed. If you have more questions about the Bozeman real estate market and COVID-19, please send us a message.