Given damage to our economy by Covid-19, many people are concerned about declining property values. Potential declines are possible….even likely, given that recovery won’t happen overnight. However, declines aren’t likely to be as severe as those following the 2008 recession.
Pricing for any commodity, including housing, is based on supply and demand. As stated previously, housing demand in the Bay Area is tied to numerous factors. Here, it’s supported by a stable economy which, although greatly influenced by high-tech, is quite diverse. Great Bay Area weather, close proximity to a beautiful coast, diverse recreational opportunities, etc., all stimulate demand.
Eventually, any reduction in housing values will recover and it may not take long since there are definite red flags on the supply side. Housing starts for February, before the virus had much impact, were down 17.5% from a year prior. Four or more unit starts were down 31.6%. With shelter-in-place requirements implemented in March, it’s highly likely March numbers will be worse and April could be worse still.
Add to that, the fact that we’ve not yet caught up with the loss of housing construction during the years after 2008, and it appears supply will remain below demand, especially if demand recovers to pre-virus levels. An imbalance caused by an undersupply will be reflected by rising prices so, if values do decline, it should be temporary so, don’t panic and sell at, or near, the bottom. Ride it out and it’s highly likely that your patience will be rewarded.
