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How Have Epidemics and Pandemics Historically Impacted the Real Estate Market?

As we navigate the enormous changes that COVID 19 is bringing to how we work and live, many industries have essentially gone dark, closing down while they wait out the storm. Naturally, homeowners and real estate professionals are wondering how this pandemic is going to impact their industry and investments. The best way to assess how the future will pan out is to take a look back at our history to find out how other similar scares have affected the real estate market.


2003: SARS

In November of 2002, the SARS epidemic started in China’s Guangdong province. By February 2003, the first cases were reported in Hong Kong, and by March, there were cases reported in 13 countries. The epidemic lasted roughly six months, peaking at over 8,000 cases and claiming the lives of 774 people.

The majority of the devastation was contained to Hong Kong, which resulted in a serious downturn for their economy. Throughout the course of the epidemic, Hong Kong’s GDP fell 5 to 6 percent and unemployment rose from 7.4 percent to 8.4 percent. However, once the epidemic subsided, the GDP snapped back, and unemployment rates began to improve, fully recovering by the end of the year.

The real estate market in Hong Kong took a hit as well. According to Zillow Economic Research, “Between February and May 2003, transactions were 33% below their January 2003 value, before returning to normal by July. We note that this fall is difficult to distinguish from the preexisting downward trend. Meanwhile, real property prices fell to 1.9% below trend in May and then recovered, although this fall is difficult to distinguish from other real estate price swings that are unconnected with SARS.”

In the United States, SARS left a much less dramatic impression. There was no indication that the SARS outbreak impacted employment rates, home sales, mortgage rates, or even commercial real estate sales.



In 2009, the swine flu virus was first found in humans in Mexico and was traced to a new strain of H1N1. Within one year, the virus had swept across the world, infecting as many as 1.4 billion and killing between 151,700 and 575,400. According to the CDC, the swine flu primarily affected young adults and children, with 80% of the deaths being people under 65 – this is an abnormality in the path that viruses generally take. In the United States alone, the CDC estimated that swine flu caused 60.8 million illnesses, 273,304 hospitalizations, and 12,469 deaths.

The impact that swine flu had on the economy, however, is difficult to measure because at the same time the United States was also experiencing an unrelated recession.

In August 2008, Fannie and Freddie spiraled downward, and by September, the stock market crashed. In the following month, Congress established the Troubled Assets Relief Program, which included a $700 billion bank bailout bill; then, in February 2009, Congress passed the American Recovery and Reinvestment Act, a $787 billion stimulus package to end the recession. The challenges continued while the US worked toward growing their economy.

The impact of swine flu on the economy could be seen in a variety of indicators, including accelerated unemployment, a decline in home sales by 3.5%, a decline in the median home price (2008-2009, -12.4%; 2009-2010, -0.2%), and an increase in cap rates. However, the changes in 2009, according to experts, is a contribution of the recession and not swine flu.


2020: COVID 19

 Today, we are experiencing the COVID 19 pandemic – a virus that, within four months of first being reported, has infected over 590,000 people and killed over 26,000 people worldwide. The virus originated in the city of Wuhan, capital of China’s Hubei province, and rapidly spread, creating havoc in markets around the world – Governments shut down restaurants, bars, gyms, and all public-facing businesses deemed non-essential. The impact of the virus has already had a more drastic effect on the housing market in comparison to the previous outbreaks.

Investors realized how many Americans would be out of work and how many industries would come to a screeching halt. At the same time, Saudi Arabia and Russia escalated their price war in the oil business, which sent stocks in the energy sector plummeting as well. These two events dealt the stock market a serious blow, which prompted the Fed to take action. They took drastic measures in an attempt to encourage consumer confidence and spending: they lowered the federal interest rate to 0%.

Ideally, these low rates would increase the number of real estate transactions by pushing people to take advantage of affordable financing. However, the lower interest rates have not been enough to instill confidence, and lenders have stalled or entirely halted loans. This is a direct result of the uncertainty of our economic future — nobody is sure how long the mass closures and shelter-in-place orders will last. What’s more, as thousands of workers are laid off across various sectors, the unemployment rate has risen from 3.5% to an estimated 5.5% since February 2020 — not exactly good for rates of prospective homeowners.

As for home sales, transactions have also stopped as a result of shelter-in-place restrictions whose strict guidelines prevent open houses and even small gatherings of people. Buyers and sellers are in a standstill, and nobody is sure when they will be able to move forward with their plans.

Of course, the COVID-19 pandemic is still playing out. The numbers are not in, so as of now, it is nearly impossible to forecast exactly how this epidemic will pan out, but past responses should make us hopeful. If the market recovers like it has in the past, we would see government aid to workers and industry, consumers eager to resume their lives, and immediate growth once the pandemic blows over.


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