The COVID-19 Impact on Real Estate in Philadelphia

philadelphia-pennsylvania-usa-UFE5RTX (1)

What was just another overseas contagion a couple of months ago is now a worldwide pandemic. The U.S., Philadelphia included, is now besieged by the Coronavirus — specifically COVID-19 — in a manner unseen for at least a century. Both the mayor and the governor are issuing stay-at-home orders to Pennsylvanians in Philly and the outlying suburbs to “flatten the curve” of occurrences so as not to overwhelm the health care institutions. 

This near shutdown of activity has far-flung economic consequences. Many small to medium-size businesses may not survive. The real estate industry is not immune. Adjustments must be made.

Hardest on First-Timers

Those new to the real estate market — the first-time home buyers — are likely to be most adversely affected by COVID-19. Those looking at houses between 100K and 300K are often wage earners, gig workers and small business entrepreneurs. 

With the restrictions on public gathering and activity, many of these people are suffering from layoffs, reduced hours and a vanishing customer base. Of this demographic, many do without sick pay or unemployment benefits. Unable to part with their saved nest eggs while the financial activity is slowed, first-timers may lose out on their dream homes to investors looking for rental units.

Easier on Techies and Professionals

Mid-level managers, medical and legal professionals, engineers and highly valued information technology specialists are in a better position to ride the hard times out. These are, by coincidence, the same people who look to upgrade their residences from the modest digs of the first-time home buyer to larger, more comfortable homes. They are either so essential that they can not be laid off or are able to perform their responsibilities from home. 

Accordingly, they are in little financial danger and can proceed with their plans to up-size.

The Luxury Market

In considering how well 1M+ dollar homes will move relative to the Coronavirus, the good news is that revenue — weekly, monthly, quarterly — is not weighing on the minds of the well-off. However, their investments are becoming a concern as the stock market suffers from prolonged shut-downs. True, the wealthy classes often buy their properties in cash without need of financing…or monthly payments. Yet when market losses accumulate and their money stops working for them, restrained spending becomes a habit. 

So, the luxury real estate market is something that needs continued monitoring.

Commercial Properties

Investor confidence does not just apply to stocks and commodities. As businesses suspend operations and outsource work remotely, vacancies will increase (and, to a lesser degree, operational costs decrease). Many real estate investment trusts have shrunk their credit lines and some deals have fallen through due to unease.

Potential for iBuyers

With nervous real estate investors and a somewhat depressed market for residence acquisition, sellers still have an alternative. iBuyers will evaluate and make an immediate offer on available properties based on basic information. For houses free of major problems, this remains a viable option.

Have questions or want to discuss the Covid Impact?
Contact Us!

Request a free, no obligation consultation.