TRENDING: 10 FAQs About Home Builder & Developer Strategies Under COVID-19

COVID-19 from TBBA: 10 Impacts on the Housing Market

10-min read
Learn how Coronavirus is shaping our world, United States and the Greater Tampa Bay Area.

Recently, I sat in on a webinar from the Tampa Bay Builders Association (TBBA). It’s a discussion about the local, national and world impacts from the Coronavirus (COVID-19). In this article, you’ll learn how it influences the different home building and development sectors. This includes the economy, government, employment and more. Here is your complete guide to the impacts of COVID-19…

COVID-19 has, and is continuing to, change all of our lives. Many of us seem to feel either frightened, nervous for the future, or even bored from the recent nationwide stay-at-home orders. Nonetheless, COVID-19 is the black swan of illnesses and is causing world disruption. Will the United States shutdown like Italy, or work to decrease the spread like South Korea?

We may not know just how successful the United States might be in reducing the spread just yet. But, I hope this complete guide for home builders and developers about COVID-19 gives you and your business some certainty in an uncertain time.


About COVID-19:

As of late March 2020, we are on the exponential growth curve of the virus. The next few weeks will reveal how scary those numbers really are, but until then we must remain positive. Keep in mind there will be a higher number of reported cases since more tests are becoming available across the country.

What is surprisingly interesting about the virus is that there is some evidence that suggests it is seasonal. For instance, all of the large and threatening outbreaks across the world have been roughly along the 30°-50° N” corridor zone. These areas include states like Washington and international areas such as northern Italy and China.

Figure 1 – World 1000hPa temperature map showing at risk zones. The color gradient indicates 1000hPa temperatures in degrees Celsius. The tentative zone at risk for a significant community spread in the near-term includes land areas within the light green.

Overall internationally, most virus models suggest a slowing of the curve, which is definitely positive. Overall nationally, New York is seeing the biggest damage with currently 92,770 cases and 2,653 total deaths. New Jersey is next with 25,590 cases and 539 total deaths so far (as of April 3rd).


10 Impacts on the Housing Market:


1. National Economic Impacts:

According to Robert Dietz, a Chief Economist for the National Association of Home Builders (NAHB), COVID-19 is hard to evaluate fully and is giving everyone uncertainty. Yet as a nation, we already know the economic and financial impacts are quite large. Markets hate uncertainty and we’re seeing it unfold in the stock market.

The impacts on home builders and developers are just now starting to show with 30% of builders seeing clear disruptions in their work progress. Macro data shows there will likely be a rough second quarter (a 10% decline, is projected), a weak third quarter and a high probability of a recession.

It’s suggested that there will be a rebound in the fourth quarter because this is not a financial shock and just a temporary pause in the economy. Dietz continued to share that the Fed funds rate is virtually zero and the 10-year treasury is sitting right at 1.2%. The Fed is doing everything it can to ensure the 10-year treasury doesn’t continue to rise.

COVID-19 has caused an eight-week pause for the economy which is damaging to the United States. Plus, consider that 30% of all building products come from China which with this lockdown, will cause lags in production time. There are high levels of fear in all regions across the country, but together we can and will get through this.


2. National Homebuyer Impacts:

COVID-19 is impacting homebuyers directly by declining consumer confidence nationwide. People across the country are now working from home and it’s causing many companies to prioritize their technology efforts sooner than later. Will these changes in lifestyle and increased teleworking be positive? Or will it be permanent? Time will tell.

Thankfully, home building, developing and remodeling are essential services. According to COVID-19 Essential Services FAQs, homeowners in the middle of buying a house are still allowed to conduct house showings if necessary and if social distancing can be practiced. However, keep in mind there is a 30-day suspension for warranty works as well.

Dietz predicts there will be checkerboard pauses, which are periods of time for social distancing taking in effect repeatedly if this virus is seasonal. Consumer spending accounts for two-thirds of the United States economy and half of that is service based. Services across the nation are taking a huge hit right now and are laying off workers.


3. National Employment Impacts:

Speaking of unemployment, this is where the news is not positive. In fact, the layoffs nationwide are totaling more than a million and unemployment could spike to double digits this year. There are 15 million people who work in the restaurant industry and with the stay-at-home orders, the job market is going to get worse in the next 2 months before it gets better.

The United States Travel Association projects that the total spending on travel and tourism will drop by $355 billion in 2020 and half of all current jobs will be lost (4.6 million). This potential hit could set the country’s unemployment rate realistically higher.

If you stack the retail and hospitality markets together, the local unemployment rate would be 10.3%. However, keep in mind this is still better than the 2008 recession when the rate was 12.6%, plus back then there was a much longer recovery time.


4. National Housing Impacts:

The housing market was on a significant upward path from the recession in 2008, but it’s going to take a hit from this pandemic. The seminar from TBBA suggested that housing has the potential to bounce back and lead the economy from the downturn once low interest rates and consumer confidence is back. This is great news.

Builder confidence is sitting right at 72%, but it could get dropped to below 50%. It’s important for you to know that the highest demographic of current homebuyers is comprised of an active adult (senior) buyer. In fact, 35% of new home sales come from mature couples and mature singles.

As part of the home builder market community, we are only in year two of those baby boomers turning 65 years of age, we have another nine plus years of demand from this specific demographic, which is another positive fact. The biggest hit sectors are the luxury housing market and the 55+ market. Cancellation rates remain stable for now, but a slowdown is ahead of us.


5. Short Term National Impacts:

Not only are there national housing impacts, but there are also impacts over time you must consider too. Dietz shared that the two-month period will come with a lot of closures of businesses, changes to lifestyle for the homebuyer and delays for home builders and developers.

Other short-term effects include extensions on deposits because equity has vanished in stocks. Also, many sales cancellations will occur because entry-level homebuyers could lose their jobs. Finally, you will see the unloading of stock inventory homes and home price depreciation for the short term.

In the next two quarters, Dietz predicts that the virus will subside and although finances will stabilize, there will be a poor second quarter. In addition, there’ll be an aggressive fiscal policy and checks to individual households and government assistance for small businesses. The market is predicted to rebound in the fourth quarter sharply.


6. Long Term National Impacts:

In less than two years, there should be a vaccine, normalization of interest rates and a potential baby boom. With everyone staying inside, Generation Alpha might kick off. Please consider that these impacts are simply predictions for what might occur by seasoned professionals.

Other long-term effects include land deals falling through or becoming delayed and declining of apartment residences. With many young homebuyers and millennials unemployed, we could also see a shift in household formation over time due to moving back in with mom and dad.


7. Local Economic Impacts – Greater Tampa Bay Area:

The local interest rates for a 30 year fixed rate mortgage varies depending on the county, but generally, rates have been below 3.5%. Tony Polito, the Regional Director for Metro City, covering the Tampa and central Florida regions, shares that the economy is not recession proof despite how successful the first quarter was.

Polito continues to share that home builders and developers should be prepared for policy work with loans and labor shortages. For the economy, there is hope for a quick bounce back by the end of the year and Polito thinks the housing market will lead the way. Ultimately, buying a house is not a lost purchase, it’s simply a delayed one once this virus is behind us.

One economic aspect which could hinder us locally is our wages. Our wages are lower than the national average. Florida has an average supply of reserve unemployment benefits and unemployment claims with a 33% jump.

The Tampa housing market started in 2020 with a great launch in monthly sales rates, it actually hit a peak before COVID-19. Other home builders claim that they have sold more spec homes this week than weeks previous. In fact, closing numbers from 2018 to 2019 are up 12% which stems from job growth. Let’s see how it plays out this year…


8. Local Government Impacts – Greater Tampa Bay Area:

Most local government buildings have closed their offices and are not open to the public. However, please keep in mind government workers are still processing permits and conducting inspections. The City of Tampa is 100% electronic, so as a community we shouldn’t have any service interruption.

If you cannot access files and work-related information remotely, then rest assured because many local government buildings have set up temporary first-floor application spaces to accommodate everyone during this trying time.


9. Local Risks for Tampa Bay:

The biggest risk we have as a community is job losses. Tampa has a little bit of everything when someone thinks of Florida. For example, we have beaches, but they aren’t like Miami. We have Busch Gardens, but it’s not like Disney World. Not only is our hospitality at risk, but also is our retail trade. Both sectors are going to be compromised from COVID-19.

If Tampa Bay loses 20% of its retail jobs, (31,560 jobs), the unemployment rate increases to 5.1%. This is a big impact but it’s nothing compared to hospitality. If Tampa Bay loses 50% of its hospitality jobs (80,550 jobs), the unemployment rate could rise up over 8%. Out-of-state buyers are a big piece of the housing demand and with limits to travel, it might not be positive for us.


10. Local Strengths for Tampa Bay: 

Although we as a community have harmful risks coming our way, we also have our local strengths. First, Tampa leads the state in high-income job growth, which means we create really great jobs and well-paying jobs for our citizens.

Second, Tampa had a lower unemployment rate than the national average for about five full years now. Since our job growth is better than the national average, it’s predicted we will bounce back quicker and easier than most of the country.

Other strengths are that the population is on a strong growth rate, Millennials are entering into the housing market and Tampa has one of the lowest resale rates in the state. A global strength for you to consider is that the personal savings rate today is higher than it was in 2005-2006, right before the economic downturn.

According to Kristine Smale, a senior VP for the Florida region from Myers Research, the entire I4 corridor near Tampa is the strongest area for housing. Furthermore, Tampa was the lowest in the nation for total housing inventory and market supply. So, if we were to see any more slowdown, Tampa will still be better off than the rest of the nation.

All of these national and local impacts may vary depending on the severity of the pandemic and how the public reacts. Please keep in mind all of these factors are predictions and could change in the near future. Below are some scenarios local home builders and developers are seeing from the virus.


Local Scenarios:

Recent research suggests Tampa Bay is just seeing the tip of the COVID-19 iceberg. Local home builders and developers are currently seeing low sales, about an 8% decline for a weighted average. Model traffic is also down 16% and many buyers are canceling their design center appointments due to social distancing and the stay-at-home orders.

COVID-19 will also limit northern consumers from traveling to Florida to look for a home. Although there are no major supply chain issues yet, it’s predicted to hit in quarter two. My advice to all home builders and developers is to be cautious and expect changes to your business structure and priorities for the next year at least.


Next Steps:

You might be wondering how to best handle this. You might be anxious about letting go of your staff members or tapping into your funds to save your business. No matter how you feel, know that this is temporary and home building and development are essential needs. Housing is a different commodity and a delayed purchase is not a lost one.

Follow this list of recommended next steps to help keep your business moving in the right direction:

  • Use this time to enhance your technology efforts
  • Make sure each one of your staff members can work remotely
  • Download Zoom, Skype or Facetime to keep virtual design appointments moving
  • Ensure all models you offer have virtual tours or walkthrough videos on your website
  • Have a long-term view on your land and properties because demand will return eventually and there will be pent up demand
  • Don’t play catch up when things are back to normal, have a plan in place
  • Stay in the know with latest COVID-19 updates internationally, nationally and locally
  • Be mindful of homebuyers, clients and staff experiencing a loss of a loved one or falling ill
  • Respect the privacy and isolation of others who are in self quarantine or are practicing social distancing

In conclusion, builders and developers are generally in good shape. After all, there is less debt now than there was in prior economic cycles and we will get through this as a country. I understand if you have questions or concerns about this guide of the impacts to COVID-19. For more information, please visit the following links and ask your questions below.


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Terry Zelen

About Terry Zelen

Creative Director | Consultant | Author | President of Zelen Communications

Terry Zelen is a seasoned Creative Director with more than 35 years of experience in Home Builder advertising and marketing.

He is the founder of The Punch List, which is an online blog to help inform home builders and developers on strategic marketing insights to fuel their firm.


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