- The U.S. housing market is in trouble as sales are heading south.
- Massive unemployment is expected to derail price growth.
- Key players are already pulling out.
U.S. real estate has enjoyed a terrific run over the past year as buyers poured into the market to take advantage of low mortgage rates. But it was a bubble that was waiting to burst as home price growth continued to outpace wage growth.
The novel coronavirus outbreak may have popped the U.S. housing bubble because of its economic fallout. Buyers are fleeing the market even though mortgage rates have sunk to record lows, and this could set off the next housing crisis.
Buyers are escaping the housing market
Real estate marketplace Zillow has suspended purchasing new homes on account of the COVID-19 outbreak. The company directly purchases homes from sellers in 24 markets through its Zillow Offers business arm. It resells them after making repairs.
Zillow CEO Rich Barton said in a press release:
Our top priority is ensuring the safety and health of our employees, customers, and partners. Given the concerns for public safety and rapid developments by governments that restrict local real estate activities, we determined it was prudent to pause our home buying to preserve our capital.
He also added that Zillow has reduced its “pace of acquiring homes over the past month.”
As it turns out, Zillow isn’t the only real estate player to have scaled down its buying activity. Redfin made a similar earlier move this month by temporarily halting the operations of the RedfinNow home resale business.
Redfin CEO Glenn Kelman sad in a blog that:
This week, home-buying demand took a big hit, with year-over-year growth dropping from nearly 27% in January and February to 1% growth over the past seven days. There has in fact been a 1% contraction in demand over the past three days.
Kelman added that Redfin’s website traffic growth has shrunk to the high-single digits this month as compared to 20% growth…