>>> Almost 1/5 of U.S. state GDP in 2019 came from real estate activity.
>>> States are estimated to have lost $10.7 billion in March and $16.6 billion in April.
>>> The states impacted most are California, Florida, and Texas.
>>> On a per-household basis, the states impacted most are Colorado, District of Columbia, and Nevada.
The Coronavirus (COVID-19) pandemic has caused devastation to populations as well as economies. In the United States, it has resulted in one stimulus package for individuals and a loan program for small businesses so far. The question remains: What will the long-term effects be of this health crisis?
The reality is that many industries have come to a grinding halt. What is and isn’t “essential” is difficult to define. Regardless, our nation is stuck between a rock and a hard place: do we let these industries continue to crumble, or risk our health to reopen the economy? There’s no good answer to that.
One of the industries getting hit the hardest is real estate. It’s quite logical, in that it’s a trade requiring an immense amount of face-to-face interaction. Viewing homes, meeting with a realtor, meeting with a lender, going to your close… all of these are in-person events. What’s more, there are common transactions that follow the purchase of a home, such as repairs and renovations, that often require a person (or a few) to enter the home.
At ReviewHomeWarranties, we aim to provide consumers with accurate and objective research. Our focus is home warranty policies, which often go hand in hand with home purchases. Consequently, we pay close attention to the real estate market. For that reason, we decided to analyze how COVID-19’s effects on real estate activity has impacted each state’s economy. Real estate transactions have a huge impact on state economies after all — 17.5% of state gross domestic product (GDP) in 2019 came from this industry.
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To do this, we used historical home sales figures through February 2020 (latest available), and estimated the number of home sales in March and April 2020 based on industry predictions. We then compared this to the expected home sale figures for March and April pre-pandemic, based on historical growth trends. Finally, we used the National Association of Realtor’s calculation of the Economic Impact of A Home Sale for each state (which accounts for expenditures like brokerage, commissions, mortgage lending, insurance, construction, and more) to calculate the income each state will forgo. Read our study methodology for additional detail into our process.
How Much Money Each State’s Economy Has Lost
Naturally, the larger a state’s market, the worse it’ll be affected by real estate screeching to a halt. Nationwide, states are expected to lose over $27 billion in economic value between March and April. In the coming weeks, as the pandemic continues to develop, we’ll be able to predict additional months into the future as well.
Below are the five states set to be hit the hardest:
1. California (-$4,070,457,077)
2. Florida (-$2,519,650,401)
3. Texas (-$2,038,337,904)
4. Colorado (-$1,188,824,872)
5. Georgia (-$1,067,753,148)
Below are the five states expected to see the least amount of economic loss in dollars — not to say it still won’t be devastating:
1. Vermont (-$14,316,723)
2. North Dakota (-$26,069,724)
3. Wyoming (-$41,542,355)
4. South Dakota (-$50,926,054)
5. Alaska (-$52,160,370)
On a per-household basis, here are the five states set to be hit the hardest:
1. Colorado (-$562.52)
2. District of Columbia (-$492.24)
3. Nevada (-$358.77)
4. Hawaii (-$339.94)
5. Virginia (-$332.96)
On a per-household basis, these are the five states that will see the least devastation:
1. Vermont (-$55.15)
2. Mississippi (-$72.25)
3. West Virginia (-$77.05)
4. New York (-$81.62)
5. North Dakota (-$82.79)
Use the interactive table below to see how all 50 states, Washington D.C., and the U.S. as a whole compare:
How Much Money Each State’s Economy Has Lost: March Detail
In the table below, we go into more detail behind the March figures. NAR reports that sales were down 8.5% across the U.S., which is an incredible blow after a very strong start to the year for real estate.
The rank of states with the most to lose in March is the same as above:
1. California (-$1,662,751,024)
2. Florida (-$1,017,641,647)
3. Texas (-$808,017,761)
4. Colorado (-$471,891,692)
5. Georgia (-$453,370,483)
West Virginia replaces Alaska in the list of the bottom 5, but otherwise this matches the above:
1. Vermont (-$5,359,048)
2. North Dakota (-$10,828,200)
3. Wyoming (-$17,306,242)
4. South Dakota (-$19,603,394)
5. West Virginia (-$20,112,071)
On a per-household basis, here are the five states with the largest loss in March:
1. Colorado (-$223.29)
2. District of Columbia (-$207.67)
3. Hawaii (-$154.21)
4. Nevada (-$153.39)
5. Virginia (-$135.75)
On a per-household basis, these are the five states with the smallest loss in March:
1. Vermont (-$20.64)
2. West Virginia (-$27.38)
3. New York (-$28.73)
4. Connecticut (-$29.38)
5. Mississippi (-$30.89)
How Much Money Each State’s Economy Has Lost: April Detail
We also wanted to go into detail on the April figures. We assumed another 8.5% decline month over month. The reality is that the rate could be far worse, unfortunately. As new data comes in, we plan to continue updating this study.
The states that will lose the most economic value:
1. California (-$2,407,706,053)
2. Florida (-$1,502,008,754)
3. Texas (-$1,230,320,143)
4. Colorado (-$716,933,180)
5. Illinois (-$629,670,284)
The states that will lose the least:
1. Vermont (-$8,957,675)
2. North Dakota (-$15,241,524)
3. Wyoming (-$24,236,114)
4. Alaska (-$30,108,260)
5. South Dakota (-$31,322,659)
On a per-household basis, here are the five states with the largest loss in April:
1. Colorado (-$339.23)
2. District of Columbia (-$284.57)
3. Nevada (-$205.38)
4. Virginia (-$197.21)
5. Florida (-$197.07)
On a per-household basis, these are the five states with the smallest loss in April:
1. Vermont (-$34.51)
2. Mississippi (-$41.36)
3. North Dakota (-$48.40)
4. West Virginia (-$49.67)
5. New York (-$52.89)
When Will Real Estate Rebound?
Unfortunately, no one can answer this question right now. It is entirely dependent on how the pandemic develops, if it can be contained with a vaccine or otherwise, and how the government bodies choose to manage the economy. Our research team hopes to see this industry — and our nation’s health — recover as soon as possible.
We used Zillow raw home sales data for each state, through February 2020. We estimated the pre-COVID expected March and April home sales figures by calculating the average February-to-March and March-to-April percentage increases in sales for each state, based on the last 2 years of data. Based on a new NAR report, we estimated a 8.5% decline in sales from February to March, and then used that same, conservative figure from March to April. Finally, we used the NAR calculations for the “total economic impact of real estate related industries on the state economy,” which includes “the expenditures that result from a single home sale, including aspects like home construction costs, real estate brokerage, mortgage lending and title insurance.”
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