News of a dangerous, potentially more transmissible new COVID-19 variant has shaken the financial markets to the core, resulting in international travel bans and renewed fears for the pandemic-weary population around the world.
But will omicron, discovered in the U.S. last week, infect the housing market?
The fear is that vaccines and antibodies acquired after infections may not be as effective against the variant. Moderna’s chief executive told the Financial Times he didn’t think his company’s vaccine would be as powerful against it as it was against the delta variant. The same day Regeneron said its antibody treatment may have to be updated to better fight the virus. If those worries are confirmed, real estate experts believe omicron could worsen the already thin supply of homes for sale, affect mortgage interest rates, and ultimately result in higher rents in some parts of the country and lower rents in others. But it will be weeks before scientists understand how the vaccines, antibodies, and treatments stand up to omicron.
“Right now, we are looking at pretty severe reactions to the omicron news in the stock market,” says Tomas Jandik, a finance professor at the University of Arkansas in Fayetteville. “The residential market may be more immune to COVID because of what we have already seen in the past waves of the virus.
“People need to live somewhere.” The discovery of the variant has led to steep drops in the stock market. The S&P 500 had its worst day since February, falling 2.3% on the day after Thanksgiving. The ups and downs have continued, as it lost almost 1.2% after the first case was confirmed in the U.S. on Wednesday.
Realtor.com® Chief Economist Danielle Hale believes omicron could lead to a continuation of the housing trends that have been playing out during the pandemic. Inventory is likely to remain scarce, prices will stay high but the growth in them will slow, and the popularity of the suburbs will endure.
“My expectation is omicron will have just a small effect” on the housing market, says Hale. “If you look at what happened with delta, there was a bit of a drop-off in listings at least temporarily. It will be somewhat similar [with omicron]. Some sellers might say, ‘Hey, let me wait for the wave of this pandemic to pass.'”
It likely won’t result in another temporary shutdown in the housing market, the likes of which were last seen in March 2020, followed by a frenzy resulting in double-digit price hikes and out-of-control bidding wars. “I don’t think the impact on the housing market and the economy will be as severe as when COVID-19 first hit,” says Gay Cororaton, a senior economist at the National Association of Realtors®. “This time the economy is better prepared. People are already working from home. We’ve seen a rise in online services and deliveries.
“It could stall … the economy, but it will not create a deep downturn that [COVID-19 initially] had,” she says.
What could omicron mean for buyers and sellers
The uncertainty surrounding the variant “could force some people into paralysis and hibernation,” says Norman Miller, a real estate and finance professor at the University of San Diego. If omicron proves to be dangerous, it could push some potential home sellers to hold off and hunker down instead and buyers to wait out the worst of it. But the pandemic is no longer new and the buying and selling process has already made necessary adjustments. So homebuyers may be more willing to continue looking—and to ultimately purchase a home.
“We’ve had a year and a half to practice virtual tours … and marketing. Some Realtors have learned to take their phone and go give a tour and let the buyers stay home,” says Miller. “We’ve taken some of the fear out of the process.” On the flip side, omicron could wind up juicing demand for homes, particularly if it’s more dangerous than recent variants.
People could go back to working from home, and returns to the office may be delayed further, leading folks to want more space once again. It could also result in additional homebuyers feeling more comfortable moving farther outside of cities where they can get more house and property for their money. “People are going to be looking for houses where they can work from home,” says finance professor Jandik. And if fewer sellers list their properties and demand rises even more, that could lead to prices surging once again.
Even with the severe housing shortage, the pullback in inventory may not be as disruptive as the holiday season and winter months are normally a slower time anyway. The next rush of homes isn’t expected to go up for sale until the spring. The hope is the variant won’t be a threat by then.
“I don’t foresee a pullback in buyer activity, transactions, or interest,” says James Monastero, the branch manager at the lender HomeVantage Mortgage in Raleigh, NC. “If they weren’t bothered last year, they aren’t going to be bothered this year.”
Source: https://www.realtor.com/news/trends/omicron-variant-impact-on-the-housing-market/