ARE WE HEADING TOWARDS A REAL ESTATE CRISIS IN THE US?

 ARE WE HEADING TOWARDS A REAL ESTATE CRISIS IN THE US?

As the COVID-19 health crisis continues to escalate and hospitalization rates rise ahead of the holiday season, in the United States and many countries around the world, certain sectors are increasingly at risk. What about the housing market? The question arises. Are we heading towards a housing crisis in the United States?

Update on key periods: before and during the health crisis

Before the coronavirus hit the U.S. coast, U.S. housing growth was in the 10% range. When the virus began to spread, the country was hit by nine consecutive weeks of year-over-year declines.

Fear of the disease, lockdowns, the stock market collapse, and uncertainty all contributed to the U.S. housing market meltdown, often referred to as the "U.S. housing crisis." The pace then slowed for four weeks, only to rebound in the following weeks.

While some predictions doomed the real estate sector to a crash, others spoke of a W-shaped market, i.e., a sector in decline after a period of recovery. Instead, i.e., instead of exhibiting the symptoms of a US real estate crisis, we have observed 25 consecutive weeks of growth (20%) year over year. Much of this growth can be attributed to a form of "catch-up" resulting from the 9 weeks of decline recorded during the summer. Real estate figures for November and December 2020 are expected to show moderate growth, with the increase in coronavirus cases possibly contributing to this moderation.

Compared to the results recorded in 2019, real estate purchase applications increased between 16 and 26% between the beginning of October and mid-November 2020.

Health crisis and real estate crisis in the USA?

The trend resulting from the health situation could lead to a decline in the US real estate market. It is highly likely that two factors will prevent the situation from returning to the one we experienced in March and April 2020.

First, the health crisis isn't new. At least, it isn't anymore. We're learning to react more calmly, without necessarily panicking when coronavirus infection rates rise. Every American citizen is learning to consume goods and services while remaining aware of a virus circulating and killing dozens of people every day. No more stockpiling toilet paper, no more isolation, and no more haunting bad news via the media.

Second, COVID tests are now more widely available. Regardless, treatments appear promising, and there's a strong possibility that an effective vaccine could emerge in the coming months.

For these reasons, even though the anxiety surrounding the coronavirus is omnipresent, the atmosphere has clearly relaxed. It's still important to be cautious and attentive, of course, but vigilance is no longer as strict as it has been in past months.

Given these factors, higher infection rates and the resumption of lockdown and containment protocols could reduce US real estate market growth to single digits compared to last year. We remain confident that growth will occur.

Low mortgage rates and a booming population (26- to 32-year-olds represent the largest segment of the US population) will mitigate any market slowdown due to COVID-19. In 2021, with the much-anticipated emergence of a vaccine and effective treatments, investors and homeowners will regain confidence.

Financial markets seem to agree, indicating that we are not, strictly speaking, heading towards a real estate crisis in the US.

A closer look reveals that even if we hadn't seen a surge in coronavirus cases, the U.S. housing data would likely have been subdued. The shift in numbers related to the health crisis is not normal. A moderation in year-over-year growth could be observed, and home purchase applications could help return to pre-Covid trends.

As with any situation where there is some degree of uncertainty, it's important to consider the theories of real estate experts with caution. A possible economic slowdown shouldn't automatically be a cause for concern, as long as the 10-year return on investment is acceptable. Therefore, it's important to consider things over a longer period before calling it a US real estate crisis.