The Historical Effect of Pandemics on the Economy and the Housing Market

Writing for Zillow, Svenja Gudell shares the results of a “deep dive into past research and data on the economic effects of global pandemics to help provide perspective on what the future could hold under various scenarios.” The past research shared here tends to focus on economic output and the housing market, noting that the effect of the coronavirus pandemic is likely to differ from a “standard recession.”

Among the precedents considered in previous literature, mentioned here by Gudell, is the SARS outbreak in 2003: “During SARS, Hong Kong house prices did not fall significantly, but transaction volumes fell by 33-72% as customers avoided human contact (‘avoidance behavior’ like avoiding travel, restaurants, and public gatherings). After the epidemic was over, transactions snapped back to normal volumes.”

A similar narrative is already apparent in China’s experience with coronavirus earlier in the year: “Meanwhile, during the current episode in China, news reports and early data provided by Goldman Sachs (2020) indicate a near-shutdown in the volume of Chinese real estate transactions, although there is not yet a clear effect on real estate prices,” write Gudell.

One caveat about sharing this literature, and Gudell’s explanation of its findings, is that the article was published on March 13, when shutting down entire cities was still a hypothetical scenario, rather than a widespread scenario. That means that some of the less aggressive scenarios discussed no longer provide the floor of expectations for the economic effect of the pandemic.