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Homebuyers’ Interest Falls as Coronavirus Hits Housing Market, Traffic on Point2 Homes Down 32%

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Homebuyers’ Interest Falls as Coronavirus Hits Housing Market, Traffic on Point2 Homes Down 32%
7 min. read

On Wednesday morning, Canada’s six biggest banks announced they were introducing mortgage payment deferrals, in an attempt to coordinate efforts to soften the social and financial impact of the COVID-19 global pandemic. This is only the latest effort in a series of measures aimed at helping homeowners through these trying times. According to Canada’s housing agency, the Canada Mortgage and Housing Corporation (CMHC), local and national institutions should collaborate to make sure homeowners aren’t forced into default during the crisis.

But what is the short-term impact of COVID-19 on the housing market? To answer this question, we analyzed Google Trends data, as well as traffic data and user behaviour on point2homes.com.

The 32% Drop in Traffic Points to Homeowners’ Changing Priorities

Finding a new home, or a better home, or selling one has definitely fallen on Canadians’ list of priorities given the current climate of uncertainty. Online searches, open houses and home tours are being replaced by activities meant to keep us and our families safe and protected.

And this becomes obvious upon a closer look at activity on Point2 Homes: at first, on the 11th of March, visits to the site dropped 8%, only to continue the following day with a 20% drop, and then 24% on the 13th of March, reaching the most significant decrease on the 16th of this month – 32%. The same is true for traffic and number of visits to the platform south of the border: visits from American prospective homebuyers decreased, leading to a traffic drop of 35% on March 16th.

The outbreak has shattered seasonality, transforming the spring months, which was normally the time when the housing market was starting to pick up speed, into a period of anxious down time. Much of the activity associated with homebuying and home selling is simply on hold, as people and institutions alike are trying to see where the pandemic is headed.

Google Trends Data Shows Similar Disinterest in Homebuying

The social and medical measures, such as social distancing and home isolation, aimed at containing the outbreak, have a clear impact on Canadians’ priorities and short-term decisions. That is why real estate-related searches in Google are falling and are being replaced by searches related to hygiene best practices advice on how to optimize work from home and ideas for activities during quarantine and crises.

Therefore, if keywords like “homes for sale” and “condos for sale” or “apartments for rent” are plummeting, interest in “work from home,” “home office” and “home workout” is clearly on the rise.

As social distancing seems to be the most reliable measure to try and keep the outbreak under control, agents and prospective homebuyers are encouraged to focus more on tools and features that don’t rely on in-person, close contact activities.

Traditional business practices like showings and open houses are decreasing and will probably stop altogether for a certain period of time, while virtual tours could replace them once everyone has a bit more information to go on.

These are the immediate, short-term changes and reactions to a crises that has introduced plenty of unknowns into the already complicated equation that is the real estate market. But although this seems to be just the beginning, with some economists warning that it might get a lot worse before it gets better, many are hopeful the measures taken now will help stave off, or at least limit, the negative outcome of the outbreak.

To see what they think, we decided to reach out to agents and real estate professors and ask them about the future of the market, the possible consequences of the fallout and also about how long buyers might be expected to feel the effects of the current slowdown. We will add their answers and update the article periodically.

Matt Honsberger
President
Royal LePage Atlantic

There will definitely be a slowdown in the market. How do you think this will impact home prices this year?

“There will likely be a slowdown, yes, but we are expecting a pause, not a stop. As equities and bond markets have people selling, people will be looking for investments that are safer and real estate can be a part of that strategy. Interest rates will likely be lower (potentially an entire percentage point), which would hopefully stimulate some more confidence in buying real estate.”

Right now, do you feel that homebuying will get back to what it was before the outbreak soon after it’s done or do you feel its effects will persist long after?

“I think there will be caution shown for a short time – as consumer confidence will have to come back. There will be an effect caused by unemployment, even if it is only short-term unemployment. Atlantic Canada has seen tremendous demand however in the last 12 months, and I’d expect that we’ll see a lot of that demand return shortly after regular work patterns resume. I don’t currently see a long term effect on the Atlantic housing market if we can get consumer confidence back up fairly quickly. The economic environment doesn’t suggest a long downturn to me – it seems to be an “incident” that’s changed the opinions of people temporarily, so I expect once it has passed, that we’ll resume for the most part.”

Jim Clayton
Director of the Brookfield Centre in Real Estate & Infrastructure
York University Schulich School of Business

There will definitely be a slowdown in the market. How do you think this will impact home prices this year?

“There is no doubt there will be a slowdown in market transaction activity and likely some softening, or at least plateauing, in home prices on average at the metro level. While it is common to compare owner-occupied housing and real estate more broadly with financial asset classes, it is crucial to recognize that real estate is different and understand how this difference impacts such comparisons, especially in the short run as stocks markets plummet and search for a bottom with heightened volatility.

Unlike public (i.e., listed and liquid) stock markets that adjust to shocks quickly and primarily through price changes, private asset markets like real estate adjust jointly through both price and liquidity, and the initial adjustments tend to be in liquidity or a slowing of transaction activity.

I expect to see a sharp reduction in transaction activity but not necessarily in prices, especially in light of the aggressive monetary and now fiscal policy that should help limit distressed sales that could be associated with widespread mortgage default.”

Right now, do you feel that homebuying will get back to what it was before the outbreak soon after it’s done or do you feel its effects will persist long after?

“The optimist in me thinks that we will revert back, especially in submarkets that were showing signs of a strong start to the spring. However, it depends on the combined impact on the job market, consumer balance sheets, immigration flows and confidence and the demand side of the market.

There certainly could be long-lasting impacts in terms of shifts in preferences for location and even features of homes. Some people may be more hesitant about being part of a crowd and hence avoid mass/public transit. The work, and learn, from home revolution that many have been calling for over the past decade could become much more of a reality and may change how and where people want to live.”

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