Introduction
The housing market is one of the main parts of each country’s economy. It represents not only people’s current financial gain but also their preferences, abilities, and changing values. Thus, the state of the market firmly depends on economic factors as well as population health, global conflicts, and crises.
One of the significant events that have recently affected the housing market and the global economy as a whole is the COVID-19 pandemic. Starting in 2019 and gaining momentum throughout 2020, the pandemic remains one of the driving forces behind the changing markets. Apart from changing how people make money, it also led to many re-evaluating their living space. Consequently, it is vital to consider the recent events and their impact on the housing market. Moreover, as one’s living situation and homeownership affect other areas of life, it is also vital to analyze how the changes in the housing market may impact the economy as a whole.
One can separate the situation in the current housing market into several parts – before the pandemic, during its onset, and a year later. Before COVID-19 was discovered, the market considered the global financial crisis as the main event influencing house sales (Statista Research Department). In many countries, including the US, the sales rates were somewhat stagnant, showing decreased growth and hesitancy in buyers’ decisions. For example, according to the Statista Research Department, between 2005 and 2011, the prices for single-family homes dropped significantly in the US.
At the same time, other markets grew substantially – the prices for real estate in Hong Kong increased every year due to the growing interest in the foreign housing market. According to Statista Research Department, from 2006 to 2019, prices for one square meter of an apartment grew by more than 350%. Such changes reflect that before the pandemic, markets behaved differently, being affected by their respective economic factors.
The COVID-19 pandemic changed the housing market, also influencing each state’s economy. The US and several European countries saw a fall, then a rise in sales, which continues to this day (“Emerging Trends in Real Estate: The Global Outlook for 2021”). Other nations, such as China, suffered from a decline in housing sales and continue to lose the momentum gained previously. As a result, the economies in these countries also see considerable changes. Thus, one can argue that the housing market reflects people’s desire for homeownership, choice of residence, and post-pandemic concerns.
Global Economy
To understand the effect of the changing housing market on the global economy, one has to examine the current situation in more detail. The contrast between such countries as China and Italy, for example, demonstrates how differently the pandemic has affected the globe.
In China, the giant housing market that supports the biggest nation in the world continues to decline. The country has experienced its biggest decline in home prices since the beginning of 2015, and it continues to suffer great losses in both selling and construction (Farrer). Overall, Chinese residents have become less and less interested in purchasing houses and apartments. A potential reason for such a low demand is caution linked to COVID-19, as it has stunned manufacturing and tourism in the last few years.
In contrast, Italy saw a quick fall and a steady increase in demand during the pandemic. Although the potential homeowners’ needs changed, they continued to purchase housing (Delmendo). As a result, the country’s housing market is stable and shows slow growth in prices (Delmendo; Tajani et al. 592).
Such a difference raises the question of whether social factors were the main drivers behind such different outcomes for the two countries. Moreover, one cannot ignore the influence these housing market changes have had on the states’ economy. In China, the country is dealing with the pandemic’s devastating impact on the tourism industry and manufacturing and business shutdowns.
Therefore, the failing housing market further weakens the country’s economic position. China’s manufacturing is a staple of its economy, but it is negatively affected by the doubt that buyers feel in relation to buying property (Cheung et al. 108). In Italy and other European countries, the pandemic also severely damaged the economy as a whole, but people’s growing interest in owning homes assisted the return to pre-pandemic rates (Farrer). Nevertheless, in both situations, the housing market strongly influenced how the economy had to adjust.
Thus, recent events have both benefits and drawbacks concerning the global economy’s state. On the one hand, the housing market shifted its preferences – people moved away from highly-populated areas and re-evaluated their priorities when choosing a new home (“Emerging Trends in Real Estate: The Global Outlook for 2021”). First-buyers gained some power and expanded their choices due to a year of lowered prices (Tajani et al. 592).
Thus, younger people could buy their first home, and many buyers felt more secure in acquiring property. On the other hand, many businesses and several countries as a whole suffered substantial losses as a result of the pandemic. Prices are currently rising in many countries, but such states as China may have difficulties rebuilding the once-booming housing market.
In the near future, the situation may not change drastically, but the impact of the pandemic is likely to last. As the businesses’ operations shift towards remote working, people also consider smaller and quieter cities as well as newly developed regions (Tajani et al. 592). Thus, new markets may appear as the housing market continues to evolve. Similarly, the economy may embrace digital transformation and find new avenues for growth. Overall, the housing market is not returning to its pre-pandemic state, but it is reshaping to respond to people’s latest views on work and leisure.
US Economy
The United States housing market has gone through a similar decline and increase in sales. Before the pandemic, the country’s housing market was stagnant, and many groups experienced financial problems (Richardson). As the pandemic started, the lockdowns and precaution measures led to many businesses shutting down. People lost their jobs, and the housing market entered into a phase of great financial strain.
Nevertheless, as the world began adjusting to working remotely, relying on delivery, and slowly opening up businesses to customers, the housing market also gained new buyers. According to Richardson, people started realizing that they did not need to find housing based on their work. Remote jobs allowed one to live in any state and region without losing income opportunities.
As an outcome, many families and young individuals relocated to areas with lower housing prices (Liu and Su 110010). Currently, cities such as Phoenix, Durham, and Nashville are more popular than the long-time expensive favorites Los Angeles and San Francisco (“Emerging Trends in Real Estate 2022”). Thus, the housing market rebounded, growing consistently from 2021 onward.
As a result of these changes, the US economy went through several changes as well. Before COVID-19 affected most business segments, the US suffered from the affordable housing crisis (Statista Research Department). Although many of the challenges related to this issue did not disappear, the demand for affordable housing changed. As people move to other areas and explore new regions of the country, affordability is not tied only to cities with many job opportunities.
Therefore, the economy in areas of increased growth evolves with businesses gaining new customers and potential employees. Similarly, first-time homebuyers can feel more secure in such markets, even if the prices are rising again. Overall, the economy still suffers from the problems exacerbated by the pandemic, but the changed perspective aids in its slow recovery.
As can be seen, the recent events impacted the way people view the housing market in the US. As Millennials and Generation Z buyers enter the market, the demands shift according to their values and concerns. Coupled with the pandemic, the economy changed to respond to the new hybrid or fully remote lifestyle (Richardson). Thus, the housing market grows, helping the country’s economy recover from losses that it suffered at the start of the pandemic.
However, the US is still affected by COVID-19 – the change in the work-life of its residents does not fully protect many businesses from closing. The economy will continue to struggle with supply shortages and workers’ health risks. While the housing market is growing, leading to positive changes in the country’s future, the impact of the pandemic is still devastating enough to leave a long-lasting impression.
Conclusion
In summary, the housing market continues to evolve under the influence of such events as the COVID-19 pandemic. The restrictions led to people changing their lifestyles, which impacted the needs of homebuyers all over the world. Globally, some countries were able to rebuild their housing market and find new demand. Others are still struggling to raise the number of new sales. The market is currently growing in the US, although the interest has shifted to such cities as Nashville and Phoenix. The economy is supported by increasing sales numbers and a new influx of buyers.
The present research is based on a combination of economic reports, news articles, and academic papers. Nevertheless, many of these sources use prediction rather than data to discuss future trends. This tendency can be explained by a rather unpredictable progression of the pandemic and people’s changing values. More information on peoples’ evolving demands is necessary to continue this exploration. Furthermore, one can also collect more data on other major concerns in the housing market, such as climate change and the digital transformation of business.
Currently, many different predictions about the housing market’s future exist. Some specialists say that the sales will grow as buyers continue preferring cheaper and less explored areas for housing. However, there also exists a question of whether the changes made to one’s workplace during the pandemic will revert to their old form. Therefore, one suggestion for future research is to collect data about people’s opinions and businesses’ views on this topic. If the adopted technology is abandoned after the pandemic, the market may start experiencing old problems of overpopulated regions with high prices and low supply.
Works Cited
Cheung, Ka Shing, et al. “Housing Market in the Time of Pandemic: A Price Gradient Analysis from the COVID-19 Epicentre in China.” Journal of Risk and Financial Management, vol. 14, no. 3, 202, p. 108, Web.
Delmendo, Lalaine C. “Despite Pandemic-Induced Recession, Italy Remains Steady.” GlobalPropertyGuide, Web.
“Emerging Trends in Real Estate 2022.” PwC, Web.
“Emerging Trends in Real Estate: The Global Outlook for 2021.” PwC, Web.
Farrer, Martin. “China Housing Market Slumps Again as Another Developer Runs into Trouble.” The Guardian, 2021, Web.
Liu, Sitian, and Yichen Su. “The Impact of the Covid-19 Pandemic on the Demand for Density: Evidence from the US Housing Market.” Economics Letters, vol. 207, 2021, p. 110010, Web.
Richardson, Brenda. “Experts Predict What the Housing Market Will Look Like in 2022.” Forbes, Web.
Statista Research Department. “Global Housing Market – Statistics & Facts.” Statista, 2021, Web.
Tajani, Francesco, et al. “An Assessment Methodology for the Evaluation of the Impacts of the COVID-19 Pandemic on the Italian Housing Market Demand.” Buildings, vol. 11, no. 12, 2021, p. 592, Web.