Update (April 8): Each state has determined whether real estate services are considered essential or non-essential and have a variety of guidances and restrictions related to it. Click here to find out what the protocol is in your state.

Update (March 26, 2020): Mortgage rates are ever-changing, especially during the uncertainty of the coronavirus crisis. Since this article was first published, they have fluctuated, and as of March 25, they are slightly higher. It is recommended that you go to Realtor.com to get mortgage rates that are updated daily.

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Covid-19, or coronavirus, is all that everyone is talking about. And there are dozens of questions related to it. Is it preventable? How fast is it spreading? How dangerous is it? Will a treatment or even a cure be found in time?

All those questions are fair, and from a public health standpoint, should be asked and answered by those who are tasked to answer them – like the Centers for Disease Control.

However, this global pandemic, while terrifying millions around the world, is also having an impact on global financial markets and likely will impact the U.S. Real Estate market soon.

“U.S. MORTGAGE RATES HIT AN ALL-TIME LOW IN EARLY MARCH, WITH THE AVERAGE RATE OF THE 30-YEAR FIXED-RATE MORTGAGE DROPPING TO A STAGGERING 3.29%.”

Mortgage interest rates are plummeting, and according to a report on CNBC in early March, they could fall as low as zero percent, and even then, the Fed could go even farther.

“We certainly think the Fed would be prepared to do more,” said Michael Gapen, head of U.S. Economics at Barclay’s in an interview with CNBC. “There’s a lot of volatility in markets, and the Fed is very concerned about market functioning and keeping liquidity free flowing and credit available.”

In addition to the plummeting mortgage interest, an already slow real estate market will be impacted by a lack of Chinese buyers.

“China has been the most important source of foreign demand for real estate,” Lawrence Yun, chief economist at the National Association of Realtors®(NAR) told Realtor.com. “The upper-end market can expect to be softer as a result.”

That’s because wealthy Chinese buyers often purchase luxury properties in places like California and New York.

According to NAR’s most recent data about foreign buyers, Chinese buyers spent $13.4 billion on U.S. homes between April 2018 and May 2019 – which is a 56% drop from the previous 12-month span.

While some of that drop can be attributed to more strict rules by the Chinese government on international spending combined with tougher immigration rules in the U.S., even those Chinese buyers who would still come to America to buy real estate have been put on ice based on travel restrictions, flight cancellations and required quarantines and self-isolations.

This takes away the incentive to buy real estate because when a potential buyer can see the property remains unknown.

The Mortgage Interest-Free Fall

U.S. Mortgage rates hit an all-time low in early March, with the average rate of the 30-year fixed-rate mortgage dropping to a staggering 3.29% according to Freddie Mac, eclipsing the previous low set back in 2012. Just a year ago, though, mortgage rates were hovering in the mid-4% range after almost touching 5% at the end of 2018.

However, some experts, like Jay Farner, CEO of Quicken Loans, sees this as an opportunity for current homeowners to refinance their mortgages and pay down the loan even faster.

“So, 30-year mortgage rates have dropped quite a bit to the low-to-mid three percent range on a 30-year fixed-rate, and we’re now below three percent on a 15-year fixed,” Farner told MarketWatch “ So, I’d say for the vast majority of Americans, they’re now in a position where they can save money by refinancing. So, they should be doing something.

“THE ONE POTENTIAL CONUNDRUM FOR LOWER MORTGAGE INTEREST RATES IS THAT IT COULD CREATE A SLIPPERY SLOPE WHERE MORE BUYERS ENTER THE MARKET TRYING TO GET A GOOD DEAL, ALLOWING SELLERS TO JACK UP THEIR PRICES.”

“Interestingly, one of the things we’re talking a lot about is people moving from a 30-year to a lower term, a 20-year or 15-year, because rates are so low, they can get a payment today at a 15-year that is similar to a payment they would have made four or five years ago on 30-year when rates were in the fives, yet they could pay their home off in 15 years for far less interest.”

Farner added though that we shouldn’t expect to see the 30-year fixed rate mortgage to drop below three percent. Uncertainty creates volatility in the market, which impacts interest rates. However, once there is certainty, either positively or negatively regarding coronavirus, it would cause interest rates to be on the rise again.

“Even if they come out and say maybe the coronavirus will be a little bit worse than we thought that would bring certainty. If it makes sense, you can save money, you got to lock your interest rates. Take advantage of the savings. And if I were a betting man, I’d say there’s a higher probability rates will rise in the (near future).”

The one potential conundrum for lower mortgage interest rates is that it could create a slippery slope where more buyers enter the market trying to get a good deal, allowing sellers to jack up their prices at a time when home prices are increasing exponentially even without the impact of a global pandemic.

Getting back to China, where Covid-19 originated, considering China has the World’s second-largest economy and it also has a worldwide supply chain. Limits on that supply chain impact businesses around the world. This can slow development even further as developers will need to wait longer than usual to get the supplies necessary to build.

The last time a health risk had this kind of impact on the global economy was in 2003 during the outbreak of severe acute respiratory syndrome, or SARS. Mortgage interest rates also dipped during that outbreak, but the impact on real estate was minimal, if at all.

That’s because Chinese investors weren’t as interested in the U.S. market at the time. Considering how much Chinese interest there is now, it leaves a lot of uncertainty as the Covid-19 virus spreads.

Luxury Homes Could See a Boost Long-Term

Wealthy buyers from China seem to be more interested in U.S. properties after negative stories emerge from their own country.

For example, there was a spike in Chinese purchases of property in the U.S. after the 2019 anti-government protests in Hong Kong.

Covid-19 could bring the same rush from China to the U.S. market as these Chinese buyers see the U.S. as a safer option than at home because of the civil unrest.

“[Chinese] people who are wealthy may feel tired of the perception of China as being a third-world country,” Yun said. “They want to park their money in a first-class world economy, which is Australia, Canada, and the U.S. Hence, we may see greater demand from Chinese, wealthy households.”

Closing Delays

While real estate is not usually subject to volatile swings in the stock market, which has been impacted by the spread of Covid-19 and the uncertainty of its real impact on public health in America, the reality is, it’s hard, and potentially impossible to close a deal on a real estate transaction of travel restrictions are put in place.

Whether a sale is contingent upon the buyer seeing the property before signing the dotted line, or due diligence is required before closing an ongoing deal, the impact of Covid-19 could cause a delay in closing, or potentially even put a kibosh on the deal in total.

Travel restrictions that are being put in place, as well as recommendations of self-isolation and the general fear of the unknown could have people sheltering themselves in their current homes and not venturing out until necessary. These kinds of actions, even if done in the minority, could create a real estate transaction slowdown, albeit temporarily.

On the commercial real estate market, transactions had started slowing long before Covid-19 was a thing. According to Bisnow, in New York City, there was a 31 percent drop in the sale of investment-grade real estate from 2018 to 2019.

“The market was soft before the news of the virus hit,” Compass Vice Chair and commercial investment sales broker Adelaide Polsinelli wrote in an email to Bisnow. “If you aren’t afraid to do business in real estate in New York City, you aren’t afraid of coronavirus.”

She added that there is a positive outcome that is running parallel to the slowdown, because some investors are seeing the drop off in competition for real estate as a golden opportunity to lock down a deal.

“This is the perfect storm for buyers,” she said. “Competition has slowed down, sellers are nervous, interest rates are low and opportunities are increasing.”

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Is Real Estate Considered an Essential Business in Your State?

Each state is operating under its own set of rules to determine which businesses are, and which aren’t, considered essential to remain operating during the COVID-19 pandemic.

Depending on the state, buying or selling a home can have a unique set of rules during this uncertain time. It is important not only for those who work in real estate to understand these rules, but also those consumers who wish to buy or sell a property.

Below is a list of each state with data gathered by the National Association of REALTORS® and is current as of April 7, 2020. For the most up to date information for your state, please check with your local government offices.

Essential States

Real Estate is considered an essential business in each of the following states. Yet in each one, social distancing is strongly encouraged, as well as other practices to help stop the spread of COVID-19.

• Alabama – mandated the shutdown of certain non-essential businesses. Real Estate is not listed.
• Alaska – relies on the Department of Homeland Security (DHS) recommended “critical infrastructure” workers which includes residential and commercial real estate services as of March 28. Congregations of more than 10 people are prohibited.
• Arizona – individuals may leave their place of residence to participate in an essential function. Real estate, appraisal and title services are included in essential functions.
• California – relies on the DHS recommended “critical infrastructure” workers which includes residential and commercial real estate services as of March 28.
• Connecticut – relies on the DHS recommended “critical infrastructure” workers which includes residential and commercial real estate services as of March 28.
• District of Columbia – notary publics are essential businesses, but only when necessary to assist in compliance with legally mandated activities, essential business or essential government functions. This originally did not include real estate services, but the DHS guidance from March 28 included real estate services as essential.
• Florida – relies on the DHS recommended “critical infrastructure” workers which includes residential and commercial real estate services as of March 28.
• Georgia – relies on the DHS recommended “critical infrastructure” workers which includes residential and commercial real estate services as of March 28. Critical infrastructure with continued in-person operation must implement mitigation measures as described in the order.
• Hawaii – real estate services, including appraisal and title services, are considered essential.
• Iowa – mandated the closure of non-essential businesses. Real estate is not on the non-essential list.
• Idaho – commercial construction, and the transfer and selling thereof, and construction of housing, and the transfer and selling thereof, are essential. Gatherings of any size are prohibited unless related to an essential business.
• Illinois – professional services including legal, accounting, tax, payroll, real estate and property management services are essential. Essential businesses should promote telecommuting where possible and comply with social distancing requirements. Open houses are prohibited. Showing of vacant or owner-occupied units are permitted if necessary and scheduled in advance (virtual showings are preferred), but limited to no more than four people.
• Indiana – real estate services, including appraisal and title services, are considered essential. However, real estate services should be conducted virtually or via telephone whenever reasonably possible and any face-to-face encounters should be postponed unless a failure to meet in person will have a significant and adverse impact on the client’s financial or legal position.
• Kentucky – relies on the DHS recommended “critical infrastructure” workers which includes residential and commercial real estate services as of March 28. However, real estate services must implement telecommuting and remote work to the fullest extent possible.
• Kansas – real estate services are essential but must use telework capabilities to avoid meeting in person to the extent possible without significant disruption to essential functions.
• Louisiana – relies on the DHS recommended “critical infrastructure” workers which includes residential and commercial real estate services as of March 28.
• Maryland – relies on the DHS recommended “critical infrastructure” workers which includes residential and commercial real estate services as of March 28.
• Maine – real estate agencies are essential as of March 25, however no live open houses are to be hosted.
• Minnesota – work that facilitates or finances real estate transactions and real estate services (including appraisals and title services) are essential. However, all workers who can work from home must do so, even essential businesses. Open Houses are strongly discouraged, and showings should only occur once a buyer has viewed the property virtually.
• Missouri – relies on the DHS recommended “critical infrastructure” workers which includes residential and commercial real estate services as of March 28. However, gatherings of more than 10 people remain prohibited. The order does not close non-essential businesses but requires them to comply with gathering limitations and social distancing.
• Mississippi – real estate services, including appraisal and title services, are listed as essential businesses and may remain operational provided they adhere to the ban on large gatherings.
• Montana – banks, realtors or others providing real estate services and title companies are essential.
• North Carolina – real estate, brokerage, appraisal, title, construction and moving and relocation services are essential.
• North Dakota – mandated the closure of certain non-essential businesses. Real estate was not listed.
• New Mexico – real estate services, including brokers, title companies and related services are essential.
• Nevada – professional or technical services including legal, accounting, tax, payroll, real estate and property management services are essential.
• Ohio – real estate services are considered essential. As of March 25, state legislature included language in a COVID-19 bill to ensure county recording offices stay open to effectuate property transfers and title searches. Local health departments may order closure of specific businesses for a limited period of time.
• Oklahoma – relies on the DHS recommended “critical infrastructure” workers which includes residential and commercial real estate services as of March 28.
• South Carolina – only closed businesses of three categories – entertainment venues, athletic facilities and close contact service providers. Real estate is not affected.
• Tennessee – relies on the DHS recommended “critical infrastructure” workers which includes residential and commercial real estate services as of March 28.
• Texas – relies on the DHS recommended “critical infrastructure” workers which includes residential and commercial real estate services as of March 28.
• Wisconsin – real estate services, including appraisers, inspectors and title companies, are essential but should, to the greatest extent possible, use technology to avoid meeting in person. They must also meet social distancing requirements promulgated by DHS and the Centers for Disease Control.
• West Virginia – real estate services, including title companies and appraisers, are essential.
• Wyoming – forced closure of certain businesses, of which real estate services are not listed. However, gatherings of 10 or more people are prohibited.

Limited States

In these states, real estate business can still be conducted, but with limitations. The limitations for each state are listed.

• Colorado – real estate appraisals and transactions are considered essential. However, per the state attorney general, real estate marketing services such as showings and open houses are not essential and not exempt from the stay-at-home order. Social distancing still required.
• Massachusetts – open houses are not prohibited but are subject to the Commonwealth’s order limiting gatherings to 10 people. Closings can continue, with social distancing required for all in-person transactions. Meetings with clients cannot take place at the agent’s bricks-and-mortar place of business, but can take place remotely with social distancing, or by phone or video.
• New Hampshire – amended on March 27 to say real estate is an essential business. However there can be no open houses, no meetings in broker offices and that social distancing is required for in-person showings, appraisals, inspections and closings.
• New York – real estate is essential, however there are several caveats. Residential and commercial showings can only be done virtually. Agents can visit a property only to conduct a virtual showing. They can oversee transactions and signings at their offices as long as social distancing protocols are followed. Appraisal and home inspection services are essential, but businesses should implement telecommuting to the maximum extent possible.
• Oregon – in-person meetings should only be done if telework options are not available. If in-person meetings are required, social distancing policies must be employed.
• Virginia – in-person meetings should only be done if telework options are not available. If in-person meetings are required, social distancing policies must be employed. All public and private in-person gatherings of 10 or more individuals are prohibited. Open houses are strongly discouraged.
• Washington – previews and showings are allowed by appointment only. The creation of virtual tours, inspections, appraisals, buyer walk-throughs and providing keys to the buyer at closing are allowed if proper sanitary and social distancing protocols are followed in each case. No other in-person real estate brokerage activities are permitted.

Non-Essential States

In these states, all real estate business must be conducted virtually or through other non-traditional means while stay-at-home orders and social distancing mandates are in effect.

• Delaware – real estate is considered non-essential. However, showings are allowed, but no open houses. Necessary actions to complete any sales or rentals that were in progress prior to March 24 are allowed.
• Michigan – no in person client contact, showings or open houses. However, appraisal and title services continue to operate to allow closings to occur. Realtors/Real estate agents can only participate in the closing remotely.
• Pennsylvania
• Vermont

No State Mandates Issued on Essential / Non – Essential Businesses

The following states have not issued mandates about essential and non-essential businesses within their borders. As such, business can go on as usual in these states for the time being, although social distancing is still strongly encouraged.

• Arkansas
• Nebraska
• South Dakota
• Utah – remote work is encouraged.

States With Uncertainties

• New Jersey – real estate offices are open, but a guidance is being sought for interaction with clients.
• Rhode Island – the state issued an order closing all “non-critical” businesses and allowed for “critical” businesses to continue to operate. However, real estate services weren’t listed on either list.

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“Guidelines and protocol surrounding COVID-19 are changing quickly. For the most up-to-date information we recommend visiting the CDC, WHO, and your local health departmentwebsites.”

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