Real Estate Markets and Coronavirus – Some Facts and Current Trends
The worldwide COVID-19 pandemic has created and continues to create unprecedented changes in and challenges to the ways we live our lives. Along with considerations that affect how we live our lives, the pandemic has affected where we live, especially for those seeking to buy, sell, or rent new homes. While the long-term effects of the pandemic on the national, state, and regional real estate markets remain to be seen, some statistics have been reported and some forecasts have been made. Responses and reactions to possible market downturns have also become commonplace on the web and in the news.
National Statistics and Forecasts
Before the pandemic struck, home prices were on the rise nationally. According to a CNBC report, home prices were rising across the nation in February, buoyed by low mortgage rates and limited supply relative to strong demand. Since the pandemic, however, demand has fallen in the face of a lowered supply. Boca Magazine shares Wells Fargo’s forecast for a significant drop in sales of new and existing homes for this month and last throughout the United States, noting that mortgage applications since early March have dropped by almost 30 percent nationally.
Local Statistics and Projections
According to the South Florida Sun Sentinel, the real estate market in South Florida is still moving, albeit more slowly. Considerations for Florida residents can be more nuanced than straightforward home purchase and sale statistics indicate, however, particularly at the local level.
For example, as reported by WLRN, 40 percent of South Florida residents rent their homes, and most spend at least 30 percent of their income on rent. Obviously, continued effects on income for South Florida residents will further complicate this equation. Currently, there is some relief as a statewide moratorium on mortgage foreclosures and evictions is in effect through mid-May in accordance with an executive order issued by Governor Desantis.
Also of concern for residents of the Sunshine State is what the future holds for commercial landlords and tenants. May South Florida businesses are among those that have been harshly and directly affected by COVID-19, such as hotels, bars, and restaurants.
Strategies and Considerations for Future Property Owners and Tenants
Going forward, landlords and tenants are seeking out means for reducing or at least providing increased tolerance for increased risks created in uncertain times. Among potential means of mitigating risk are two types of contract clauses:
- clauses that specifically address the COCID-19 and its effects on a sale or lease
- force majeure clauses
Clauses that specifically address COVID-19 can be tailored to a specific sales contract or lease, to allow for extensions of important dates, for example, or to allow a party a safety net for or tailored relief in the event of nonperformance.
Force majeure clauses are not unusual to real estate and other contracts. A force majeure, according Merriam-Webster, is a superior or irresistible force, or, for purposes of the more common and related legal interpretation, an event or effect that cannot be reasonably anticipated or controlled. Force majeure clauses can provide a way for a party to be excused from performance of some or all obligations under a contract for reasons that are spelled out in the contract’s clause, such as, for example, weather extremes (hurricanes, floods) or other natural or manmade disasters (earthquakes, acts of terrorism, for example.)
Novel considerations based on current conditions should be analyzed by anyone considering buying, selling and renting real estate in uncertain times. If you are interested in learning more, contact the experienced Fort Lauderdale real estate lawyers at Sweeney Law.