Housing prices in major cities across the country could fall as a result of the pandemic.
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The coronavirus pandemic has many Americans heading to the hills, or the suburbs, so to speak. And city home prices could decline as a result, says Nobel Prize-winning economist Robert Shiller.
In an interview with CNBC CMCSA,
Shiller described the broad risk to the economy posed by the spread of the new coronavirus and the resulting impact on the global economy.
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“People will not be willing to spend $ 1 million on a small condo for years to come if they feel that way.”
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“We have high-priced markets in the stock market, the bond market and the housing market,” Shiller, co-founder of the S&P CoreLogic Case-Shiller National House Price Index, said in the interview. “All of these markets could fall in the coming months.”
However, when it comes to housing, the impact of a decline would not be felt equally in all markets. By contrast, Shiller presented the worst case scenario for urban markets in the United States.
“What is good about the city? They are good restaurants, theaters, museums, art exhibitions, ”he said. “But if you’re afraid of people because you think you might catch something in the next epidemic, then it can color your whole feeling about the city.”
In addition to that fear, many employers have embraced remote work amid the coronavirus pandemic. Facebook FB,
It has said it will increase hiring of remote workers, while other companies have given workers the option of continuing to work from home indefinitely amid the pandemic. There’s even a “work from home” ETF that aims to capitalize on the trend.
Since living near work is a minor necessity, many Americans can see fewer reasons to pay a premium for living in the city. That could accelerate the trend of people fleeing major cities that existed before the pandemic began.
See also: More than 20 million Americans may be evicted by September
“It can cause a price decrease,” said Shiller. “People will not be willing to spend $ 1 million on a small condo for years to come if they feel that way.”
A drop in house prices would represent a major change. Data released last month showed that house prices continued to rise in April, even as COVID-19 cases rose rapidly across the country.
Economists have suggested that a low supply of homes for sale across the country and increased demand caused by low mortgage rates could keep prices high.
But some researchers have agreed with Shiller’s conclusion that some house prices will fall. “Housing is likely to feel the slowdown in the overall economy, albeit to a slight degree, and the value of housing will fall in the coming months,” Zillow ZG,
Senior chief economist Skylar Olsen said in a recent report.
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