By Mike Sunnucks | Rose Law Group Reporter
Regional real estate expert Jim Belfiore said the housing market saw a 40 percent drop in new homes sales the past 60 days — and that may be the bottom point of the impact of COVID-19.
“I think that is the bottom that we hit,” said Belfiore, who is president of Belfiore Real Estate Consulting in Phoenix.
Previous expectations projects as much as an 80 percent drop in home sales due to the shutdowns because of the Coronavirus pandemic.
Belfiore said the impact has been dramatic but not as much deep as expected and he is already seeing some improvements as the economy in Arizona reopens.
“The builders we talked to suggest that it’s improving,” said Belfiore.
He said the reopening of sales offices, the fact Arizona allowed construction sites to remain open and historically low interest rates lessened COVID-19’s blow to the housing market and encourage buyers.
“This could be a ‘V’ recovery,” Belfiore said referring to a more aggressive economic rebound after the fallout from the Coronavirus.
The most recent monthly data from mid-April to mid-May shows a 23 percent drop in new homes sales from the previous 30-day period and a 13 percent drop from a year ago.
Belfiore said the very strong first quarter for home sale before COVID-19 will help ease the projected annual decline in new homes sales for 2020. He expects to see a 9 percent drop in 2020 new homes sales compared to 2019.
A new research report from Belfiore Real Estate Consulting does point to potential lending and liquidity challenge coming out the Coronavirus.
“More buyers would be purchasing, undoubtedly, if credit availability hadn’t shrunken in recent months. The CARES Act contains forbearance laws with side effects. As it turns out, lenders’ appetites for originating new mortgages sour when faced with the prospect of the requirement of allowing buyers to decide they’d like to take a year-long hiatus on mortgage payments. Rates are now artificially higher- up by as much as 1 percnet (compared to the typical spread between 10-year Treasury bond rates and mortgage rates), and fewer lenders are in the market.
Underwriting standards are tighter now than during any period since 2014, and some types of loans are extremely difficult to attain,” the report outlines.
The pandemic has cost the U.S. economy more than 40 million jobs including 229,000 in metro Phoenix, according to the U.S. Bureau of Labor Statistics.
Belfiore said it will take a while for the real estate market to get back to the unprecedented strength it had during the first quarter and the recovery hinges on not having additional outbreaks and closures.
“Were not going to get to where we were in the first quarter anytime soon,” he said.
Still, COVID-19 impact on the housing market is not as bad as first feared.
“A total drop-off of 40 percent is believed to have taken place- far less than was expected just 30 days ago,” Belfiore said in his new report.