The U.S. housing market is feeling the impact of the new coronavirus outbreak from China. Mortgage interest rates have dropped because of it, and the luxury sector has seen Chinese buyers, who had been propelling that market, quickly vanish from it.
“China has been the most important source of foreign demand for real estate,” Lawrence Yun, chief economist at the National Association of REALTORS®, told realtor.com®. “The upper-end market can expect to be softer as a result.”
International buyers from China spent $13.4 billion on U.S. property from April 2018 to May 2019, according to NAR research. Chinese buyers have had the largest presence in California and New York markets.
“In the short term, the virus could dampen [luxury] sales further,” says Danielle Hale, realtor.com®’s chief economist.
A temporary ban on any foreign nationals who have been in China the past two weeks and cancellations of many flights from China to the U.S. will likely impact the real estate market over the coming weeks.
The flu-like illness, which started in Wuhan, China, has infected more than 28,000 people and resulted in 565 deaths. So far, there have been 11 confirmed cases in the U.S. The World Health Organization has declared the coronavirus a global health emergency.
One surprising impact from the coronavirus has been the way it has been pushing down mortgage rates in the United States. “China is the world’s second-largest economy, with a worldwide supply chain,” realtor.com® reports. “So what happens there affects businesses around the world, which then affects global financial markets. Amid market turmoil, investors tend to pull money out of the stock market and park it in safer, more stable U.S. Treasury bonds. And when bonds are strong, mortgage rates fall.”
The 30-year fixed-rate mortgage has fallen 9 basis points to 3.51%, as of Jan. 30, according to Freddie Mac. The panic over the coronavirus could push rates even lower, economists say.
Source: “U.S. Real Estate Market Shows Symptoms of Coronarvirus Effect: What You Need to Know,” realtor.com® (Feb. 6, 2020)