According to the National Association of Realtors, pending contracts for property sales dropped by 20.8% in March. Further, the 30-year fixed mortgage interest rate dropped to 3.43%, but a great majority of people are still not interested in buying or renting homes at the moment. Economists predict that home sales could shudder in the next three months losing as much as 40% of activity. Data also shows that indebted Airbnb ‘Superhosts’ are losing their shirts, as the company lost $1.5 billion in bookings since mid-March.
March Numbers Are In – Pending Home Sales Slide by 21%
Five weeks ago, a decent number of market strategists and economists predicted that U.S. property and real estate prices would drop significantly, due to the Covid-19 outbreaks and government-induced lockdowns. Statistics show that the month of February was 16.3% lower than in 2019, and numbers stemming from March 2020 dropped massively. Recent data stemming from the National Association of Realtors says pending contracts in March have shown property sales dipped by 20.8%. Statistics indicate that across the nation, the Northeast saw a drop of 14.5% and the South dropped 19.5%. Data from the Midwest shows sales reduced by 12.4% annually and close to 22% during the last 30-days. Pending home sales in the West fell by over 26% weekly, and annual stats also show sales dipped by 21.5%.
Despite the massive downturn, realtors in America are still hopeful they will see a rebound. However, some speculators believe the drop in pending contract sales and property values will drop even more soon. Most of the U.S. is still on lockdown and with stay-at-home orders, which means open houses and closings have been canceled in great numbers. Economists think that buyers are not going to settle for no-touch video open houses and closings and will simply wait until the shutdown’s end. George Ratiu from the web portal Realtor.com says that homes on the market right now might even be considered desperate sales.
“If your house is on the market a buyer is going to assume it’s a sale by necessity,’’ said Ratiu, a senior economist at Realtor.com. “If you don’t have to sell right now, why would you? There will still be transactions, but the number will be so low.’’
In the Next Few Months, Economists Estimate US Real Estate Market Activity Could Drop as Low as 40%
Interestingly, despite the fact that pending contracts are slumping, renters cannot pay rent to landlords, over 30 million Americans are unemployed, and the housing market represents 18% of the U.S. economy, American realtors are clinging to hopium from memories of past sales. Traditionally, the spring selling season is some of the best months for realtors and many may not be able to weather a property slump. Because the pending contracts and sales dipped so much last month, some market strategists think that even larger drops will soon follow. According to Lawrence Yun’s statements during a press conference, the chief economist of the National Association of Realtors (NAR) stressed:
Market activity will be lower in the next couple of months. I won’t be surprised if sales activity could be down 30% or even 40% in the next few months.
Yun also highlighted that there are other signs that show troubles within the U.S. real estate market and it has to do with the reduction of sellers. March 2020 listings in America indicated that it was the lowest since 1999, and the current supply is only enough for 3.4 months going forward. “Unfortunately, we knew home sales would wane in March due to the coronavirus outbreak,” the NAR chief economist conceded.
With the Airbnb Bubble Disaster, Young Home Buyers, Millenials and Those Waiting for a Big Dip In Home Prices May Get Their Wish
Another pending problem is the number of U.S. mortgage defaults that are expected to rise significantly. A great number of Americans are landlords who rent their homes and apartments to renters. Some American banks have rolled out some plans for mortgage owners, if they happen to default on their loans. However, many renters are left with little options and there are millions of U.S. citizens who cannot pay or are having an extremely hard time coming up with monthly rent.
Another faction of risky landlord schemes and property ownership is the trend of Airbnb Superhosts who are in deep water due to the rental slowdown. There are 25-year old residents in the U.S. with more than 10-25 rental properties under their name and at one time, those rental homes were quite lucrative. Recent reports indicate that many Superhosts are struggling because they are dependent on rent and still have to pay for cleaning services and property maintenance workers.
Data shows that Airbnb lost more than $1.5 billion in bookings since the market rout on March 12, otherwise known as ‘Black Thursday.’ The company was able to fend off some of those losses by getting a loan from Airbnb’s institutional and venture capital investors. But Superhosts who are indebted are having a hard time getting help and most cannot get small business (SBA) loans from the government.
Statistics from the company Airdna, show that roughly one-third of Airbnb hosts are Superhosts with an average of 25 short-term rental properties. Because Airbnb has grown so popular, rental losses and defaults may have a serious impact on real estate prices across the nation. A financial analyst from Nashville, Austin Hankwitz, believes this might be a shining moment for young home buyers and millennials.
“Airbnb is a fantastic tool for those who travel often, but unfortunately, that’s not happening right now,” Hankwitz remarked. “This lack of travel and tourism is already causing Airbnb hosts to slash their prices by more than 80% in some cities. If this goes on for much longer, a lot of these cash-strapped hosts will be forced to sell their properties. This flood of new properties for sale might cause home prices to drop sharply in a short period of time. To add to this scenario, baby boomers that are considering downsizing to pull equity out of their current homes to aid their retirement funds, and you have a recipe for disaster.”
What do you think about U.S. real estate prices possibly dropping by 30-40% lower? Let us know in the comments below.
Image Credits: Shutterstock, Pixabay, Wiki Commons, NAR, Dr. Duru, Airbnb logo,
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