In the two major metro markets in Maryland, the real estate sector started strong. Unfortunately, the COVID-19 pandemic led to unprecedented lockdown orders. MarketStats data indicates that in Washington and Baltimore metro regions, the highest median March sales prices peaked at the highest amounts in the past ten years.
However, by the end of the month, there was a significant decline in new listings. According to Chris Finnegan, Bright MLS’s chief marketing and communications officer, the metro area reached a March 10-year high for the median home sale price. The figures on March housing are the first data to indicate for the COVID-19 pandemic has impacted the sales of local residential real estate.
In March, the median residential real estate price in the eight counties and city that constitute Maryland’s primary metro jurisdiction almost touched $330,000. The median year-over-year price rose by 8.4 percent. Simultaneously, the number of closed sales in those jurisdictions witnessed a median increase exceeding 16 percent.
However, the pending sales decreased starting February in each of the jurisdictions in a period when sales should have been set to increase as we headed into the normally strong spring selling market. The year-over-year number of pending sales dropped by a median of 3.25 percent throughout the metro jurisdictions.
The number of new listings also decreased in March in comparison to the previous month. The Montgomery and Anne Arundel counties saw a slight rise in the number of new listings compared to last year, but the median number of new listings reduced by 2.5 percent in that category.
Recent times have witnessed a large number of Maryland residents making first-time unemployment claims.
Concerns about whether potential homebuyers will choose to opt out of purchasing new homes are growing. There is speculation on whether there will be another economic downturn, similar to the Great Recession in 2008, due to the possibility of a rise in foreclosures. As of now, the federal and state governments have ordered moratoriums on foreclosures.
According to local authorities, projections already indicate a substantial shortfall in revenues due to income tax loss. Local governments are keeping a close eye on the housing market as their largest source of income is from property taxes.
In case the economic damage due to the COVID-19 pandemic hits the residential real estate market, local authorities will face an even more challenging situation in paying their bills. Certain jurisdictions, such as Baltimore, are in the process of contemplating layoffs and furloughs for firefighters and law enforcement personnel.
Ted Zaleski, the Director of Management and Budget in Carroll County, states that in the short term, the loss of revenue due to the coronavirus pandemic is not alarming. However, at some stage, they will have to assess the effect of this situation on future earnings, which can have a significant impact.
Disruption of Homebuilder Supply Lines due to COVID-19
The coronavirus pandemic has had an adverse effect on the home builder supply chain. The National Association of Home Builders states that almost one-third of home building supplies are sourced from China, besides finished goods such as sinks, appliances, and bathtubs. There has been a significant disruption in these supply chains.
At a time when home construction finally gained momentum, such delays could have a negative impact. Home construction has been struggling to keep up with demand since the financial crisis due to the scarcity of available land, cost of construction, and shortage of construction labor.
But the NAHB indicates that homebuilder confidence has risen significantly in recent months. This means that among builders, there is more inclination to commence construction on residential real estate.
The Oncoming Spring Homebuying Season
The conditions were favorable for the spring homebuying season to be incredibly competitive due to low inventory, high demand, and low mortgage rates. It is a good idea for existing homeowners to consider refinancing to take advantage of such low rates.
However, there has been a drastic change due to the COVID-19 situation. The mortgage industry could be sent reeling due to any prolonged suspension in mortgage payments and cause a liquidity crunch. In this event, lenders will not have sufficient capital to give loans to potential homebuyers.
However, if the lending infrastructure of the mortgage industry sustains limited damage, a rapid recovery might be possible. This would bring the residential real estate market back to where it was before the coronavirus pandemic.
The mortgage industry could make a quick recovery, but the economy at large may not. That would impact demand, and there will be potentially fewer buyers in the market. This would be welcome news for potential buyers who will now face less competition while trying to purchase their dream residence.
Consult an Experienced Real Estate Attorney
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