Analysts Are Cautiously Optimistic Omicron Won’t Damage Housing Market

Investors and economic analysts are closely monitoring Omicron, the Covid-19 variant taking the news cycle by storm, as the country enters the busy holiday season.

The question on mortgage professionals’ minds is: how will Omicron affect the housing market? Analysts’ answers are mixed, but the overall trend is cautious optimism.

“Right now, we are looking at pretty severe reactions to the omicron news in the stock market,” Tomas Jandik, a finance professor at the University of Arkansas in Fayetteville, told “The residential market may be more immune to COVID because of what we have already seen in the past waves of the virus.”

“It is unlikely that rates will move down any further due to the new Omicron variant,” Shmuel Shayowitz, Approved Funding president and chief lending officer, told The Street.

“While there is certainly a concern especially with what’s going on in other countries, right now bond analysts are optimistically cautious and do not think with the information that we are (seeing) now that it will have any significant impact on markets.”

One idea is that a pandemic surge could actually help the market by dampening demand and giving factories and transportation companies time to catch up on their backlog.

“If it slows down demand, it will give overloaded logistics networks a chance to catch up,” Willy Shih, an international trade expert at Harvard Business School, said in an article published by The New York Times. “Remember, there is still a lot of inventory in the pipeline coming at us.”

Housing construction is swamped by delays in shipping and production. Building times have risen to over a year, fueling huge price growth as well as rent increases as buyers wait for construction to finish.

If Omicron does give companies time to catch up, the construction cost surge would theoretically take a breather, too.

But not everyone expects Omicron to be a positive influence on delays. “Greater concerns about the virus could reduce people’s willingness to work in person, which would slow progress in the labor market and intensify supply-chain disruptions,” Fed Chairman Jerome Powell wrote in prepared testimony to the Senate Committee on Banking, Housing, and Urban Affairs.

But another potential outcome, and one that many analysts seem to be banking on, is that nothing much will come of Omicron. Chief Economist Danielle Hale expects little to change, with Omicron fears following the same pattern as Delta.

“My expectation is omicron will have just a small effect,” she said in an article written by Clare Trapasso.

“If you look at what happened with delta, there was a bit of a drop-off in listings at least temporarily. It will be somewhat similar [with Omicron]. Some sellers might say, ‘Hey, let me wait for the wave of this pandemic to pass.’”