How Has COVID-19 Affected Home Valuations and Rental Rates?

While numbers are still coming in, we’re starting to see how COVID-19 has started to affect major residential markets, what’s coming next, and how you can respond.

Economically, some of the first impacts of COVID-19 were felt in the March 2020 real estate market. Because of stay-at-home orders and social distancing recommendations, many homeowners thinking of selling or renters thinking of moving put off their plans in order to see what would happen in the subsequent months.

Now, with the normally active Spring market a bust and widespread unemployment a reality, the first numbers are coming in to indicate the dollars and cents impact COVID-19 has had on home values and rental rates.

Home Value and Rent Rate Comparisons

Overall, the news is a mixed bag, with a variety of trends affecting the values of residential real estate. Moratoriums on evictions in most major cities mean that while rental rates may be holding steady, many landlords are not getting paid at all or are seeing significant drops in revenue. Here are some of the numbers for major markets around the country.

NYC

Perhaps the hardest hit market nationally, New York City saw some good news as rent collections held steady and real estate deals continued to move forward. The luxury market — which had been in freefall for some time — continued to struggle, while buyers and sellers in more moderate sectors forged ahead with pre-COVID plans, sometimes buying properties sight unseen. One bright spot? The Hamptons, which had seen a major decline in the past few years, is suddenly hotter than ever as city-dwellers flee to its comparably wide open spaces.

Chicago

A lack of new construction and fewer homes going on the market has translated into higher home prices in Chicago, with multiple offers on existing inventory driving up prices even more. One sector that’s not sharing in this trend? Luxury, which appears to be suffering from a combination of uncertainty and the aftereffects of COVID-19-related stock market declines.

California

Unlike other markets, California is continuing to see a lot of activity in the luxury home sector, utilizing private lending to keep cash flowing for those jumbo mortgages. While sales volume has declined in many markets, the price for homes has held steady or risen, often because of reduced inventory levels.

Florida

Florida Realtors chief economist Brad O’Connor says that despite a reduction in sales volume statewide, Florida home values are expected to hold steady. Why? Here too, the answer comes down to reduced inventory. In comparison to 2008, when many markets nationwide had overbuilt, there are still not enough homes on the market to serve all of the hopeful buyers in most areas. Coupled with COVID-related construction shutdowns in the Sunshine State, demand and supply should stay in balance and keep home values on track.

Denver

Like other markets, Denver’s residential real estate market held steady due to reduced inventory except in the luxury market, which saw a significant reduction in home values. Decreased demand in the Denver rental market has translated into a softening of rent rates. According to statistics compiled from online listing portals, Denver saw median rent rates decline as much as 7 percent year-over-year in March.

Does this mean it’s a buyer’s market?

For some buyers, COVID-19 has looked like an opportunity to go bargain-hunting when buying that first home or scaling up to a larger one. However, this hasn’t necessarily been the case everywhere. Hot markets that normally experience low inventory and multiple offers are only getting tighter. Restrictions on the construction industry, homeowners choosing to stay-put for another year, and the general uncertainty in the economy has meant that prices in many residential markets are holding their own, for now.

Where are the bargains right now?

There are some major bright spots in specific sectors. However. In many areas, real estate investors are less active, for a variety of reasons. Low inventory, an inability to schedule construction and renovation work, and a tighter-than-usual mortgage market have all cooled investment activity. That is good news for first-time homebuyers who are normally competing with all-cash investor offers.

In addition, of course, the luxury sector may be the best place for buyers to find big bargains. Those homes that went on the market prior to mid-March have been languishing, and savvy buyers and their brokers may want to find out if there’s room for negotiation. Another advantage to luxury home ownership right now? More room to spread out, more outdoor recreation features, and more space for quarantine-weary families to conduct their work-from-home activities.

What should rental property owners do now?

For landlords and property managers, this has been a frustrating time. Revenue is down in many areas as cash-strapped newly unemployed renters have been unable to pay their monthly rent. While many landlords initially provided accommodations to help their tenants get back on their feet, as the COVID-19 restrictions extend into the summer, property owners may be feeling the pinch.

With rental rates projected to soften in many markets, some property owners may see this as a good time to cash out or reconfigure their investment property portfolio. As limited inventory drives up home values, there may be a desire to exit underperforming properties and to buy in areas with stronger potential. In addition, some single family property owners may want to transition to multi-family properties for greater diversification and stability in the months to come.

As markets begin to reopen, there may be movement in many rental properties, both from pent-up demand and from the aftermath of COVID-related job losses, relocations, and changing living arrangements. It is more important than ever to make good decisions when screening and evaluating potential tenants. That’s where Rentspree comes in.

With a suite of tools designed to help you streamline and secure your application and background check process, you can ensure faster, better decision-making, both now and in the days to come.

RentSpree is the preferred, online tenant screening provider of the Apartment Association of Greater Los Angeles. With it, you can put together a completed application package in one simple step. This includes a completed rental application, credit report and score, criminal background check, and national eviction history. RentSpree can handle the entire screening process for you and it takes just two minutes to start screening! Better yet, you can receive all reports back instantly at the property or at another time of your choosing. Visit https://aagla.rentspree.com to learn more.