Move Over Delta It Is Time For Omicron
Over the past eighteen months we have witnessed an incredible real estate market. Home buyer demand has gone through the roof along with home prices. Homeowners have seen home values skyrocket as well as their equity. Ironically, this wouldn’t have been possible without a global tragedy. The coronavirus pandemic is what kicked off the red hot bull run. Many predicted that it would lead to a complete real estate crash similar to 2008, but the opposite happened. To prevent a market crash from occurring, the Federal Reserve slashed interest rates, which caused mortgage rates to reach record lows. In turn, home buyers clamored to stop renting and become homeowners, but inventory could not keep pace. We have been waiting to see how the real estate market would fare once the pandemic ends. However, the rise of the Omicron variant of the virus means we will have to wait to see.
What Omicron Means for the Home Buyers and Homeowners
As we have learned over the course of this pandemic, everything in our society is related. Public health threats do not merely impact public health. Public health is connected to unemployment, it is connected to government policy, and it is even connected to the overall economy. We have already discussed how the pandemic is directly responsible for recent real estate trends. Before we begin to speculate on how this new variant will impact home owners and home buyers, some background is necessary.
The Rise of the Coronavirus Variants
All viruses mutate. Not all mutations are worrisome. Sometimes viruses mutate in a way that makes them less transmissible and less deadly. Other times, it is the opposite. Since the beginning of the pandemic public health experts have been tracking each new variant. If the mutations result in a variant that changes transmissibility, severity, or has caused significant outbreak clusters then it becomes a variant of interest. If the mutations make any of the above changes to the detriment of public health measures, then it becomes a variant of concern. Since the beginning of the pandemic we have had five variants of concern: Alpha, Beta, Gamma, Delta, and Omicron.
Variants of concern are exactly as the name suggests, they are concerning. They are concerning because they seriously increase the possibility that the pandemic will continue indefinitely. We finally thought we were turning the corner on the pandemic earlier this spring as vaccines were rolled out to the general public. Unfortunately, all of that was upended when the Delta variant rose to prominence. Delta hit like a sledgehammer in the summer, especially in the South. As the numbers of cases, hospitalizations, and deaths rose we were thrown into a horrible sense of deja vu that was reminiscent of the worst of last winter. In response, vaccination rates picked up and booster shots were approved. Altogether, it seemed like we were getting a hold of Delta and the pandemic. That was until the Omicron variant was identified in the past week.
The Fallout from Omicron
Omicron is new but we are already starting to see some fairly dramatic fallout. Nations are on edge and doing what they can to stop its spread. The U.S. has limited travel from South Africa, which was the first nation to identify the new variant. Israel has gone even further and is restricting travel from all nations. Whether these actions are warranted or not is unclear. The doctor who discovered the new variant says it has milder symptoms than other variants. However, experts urge that it is too soon to reach any conclusions. A lot more study needs to be done before we can understand the threat this variant poses and whether vaccinations are effective.
Even though more time is needed to understand the full consequences of Omicron, markets wasted no time making a determination. Stock markets all over the globe took a massive hit on Friday as news of Omicron spread. Many market experts are predicting that turmoil will continue throughout this week. Again, we are learning the lesson that what happens with public health causes ripples throughout every aspect of our life.
Omicron and Real Estate
Omicron’s impact on the stock market was immediate, but there is no telling how long it will last. The new variant has the possibility of impacting the real estate market, but how and by how much is a lot less clear. One immediate consequence was that interest rates were lowered on the news of Omicron. This is somewhat contrary to what many were expecting. It is no secret that inflation has been rising. One way the Federal Reserve responds to inflation is to increase interest rates. In fact, the Federal Reserve has gone on record that they would be willing to increase rates if inflation continued. The new variant throws a wrench in the Fed’s plans. One of the key tools they have used to keep the economy afloat during the pandemic is low rates.
Interest rates are important to home buyers and homeowners because they impact mortgage rates. Many have been anticipating that mortgage rates will be rising in the near future and throughout the next year. Rising mortgage rates adversely affect home buyers and home owners. As mortgage rates rise, home loans become more expensive for home buyers, especially first time home buyers. It also makes refinancing an existing home loan more expensive for more homeowners. Basically, Omicron has the possibility of greatly impacting the next few months of the real estate market by influencing the direction of mortgage rates. If it will and how it will is anyone’s guess. We will all have to wait and see what Omicron holds and then wait for the fallout from there.
Final Thoughts
When the pandemic first made it to America we all thought that it would be here for a few weeks and then life would be back to normal. Over eighteen months later and we are not back to normal. On top of that, new variants like Delta and Omicron keep popping up and changing the course of the pandemic in ways many would not have predicted. As the pandemic changes, so do our public health responses and so does the economy, along with the real estate market. However, no matter what has happened during the pandemic one thing that has stayed consistent is the thriving real estate market. Home buyer demand has not abated and homeowners keep reaping the rewards of high home values. Nobody knows if Omicron will upset these trends. What we do know is that the current moment is still great for homeowners and home buyers.
If you are a home buyer who wants to take advantage of the current good times and buy a home of your own, contact us. If you are a homeowner and want to refinance your current mortgage, then you should also contact us. The professionals at Peoples Choice Mortgage can help you with your new home purchase or refinancing your home loan. We offer no-obligation mortgage qualifications to anyone who is interested. We have no idea how long today’s red hot market will last, so it is best to take advantage of it right now.
