Investors Flock to Residential Housing Market as Economic Downturn Accelerates

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Source: Unsplash

Although the current economic downturn, driven in large part by fears over the COVID-19 virus, is still in its early stages, the response of investors is becoming clear. As well as piling onto safe-haven assets such as gold reserves and US Treasury Bonds, residential housing is also proving to be a popular place for people to park their cash.

The US news website CNBC recently reported that overseas investors are piling onto the US residential housing market, with inquiries and cash sales skyrocketing over the past couple of weeks. Urban centers with strong prime real estate markets such as San Francisco, Los Angeles County, New York City, and Miami have seen the strongest upswing in interest in recent weeks. This is largely because real estate is considered among investors to be a safe bet in times of crisis. 

However, another reason may be that investors spot the potential to snap up some bargains that they can make a tidy profit on later on. In response to global stock markets experiencing their worst month since the Great Recession, long-term interest rates around the world have plummeted. In addition, the US Federal Reserve has announced plans to slash interest rates further throughout the year to provide some much-needed stimuli, with financial authorities around the world poised to follow suit.

Rate cuts may be good news for investors, but they are even better news for first-time homebuyers, as they equate to cheaper mortgages. On top of this, US realtor organizations are warning that current economic jitters could keep homebuyers away, for the time being, resulting in sellers slashing prices across the country in an attempt to lure buyers back.

Source: Unsplash

Similar trends are also being observed in overseas housing markets such as the UK, which has seen similar levels of economic panic in recent weeks. An additional factor that UK homebuyers may have in their favor is technology, with a UK-based free online mortgage advisor like Trussle, that seek to secure the most favorable mortgage rates possible for buyers, meaning that 2020 may turn out to be one of the best housing markets for buyers in years. It’s unclear whether house hunters here in the US will try to take advantage of the buyer’s market in the same way, but current trends suggest as much. However, it’s worth noting that if investors do begin to flock to housing en masse as a safe asset, this might have the effect of pushing prices up.

Either way, rock-bottom long term interest rates are still good news for anyone looking to secure a mortgage, particularly if they are first time buyers. It is unclear as yet whether the recent market turmoil will translate into a long-term economic decline. If not, then now may be a good time to take advantage of the market to secure some real estate, if the investors on Wall Street are to be believed. 

While the stock market has seen a rough few weeks so far, it is still entirely likely that the panic will subside and that markets will bounce back over the summer. Either way, things are currently looking rather good for anyone looking to invest in property or purchase a home of their own.