# How could Coronavirus layoffs impact Home Prices in the United States

May 13, 2020
Please take this post with a grain of salt. Its purpose is to demonstrate how to analyze simple datasets with Python, not how to make gold standard econometric predictions of home price changes based on unemployment rates. But since this is an actual question on many minds right now (including my own), I thought a 15 min exercise would be interesting.
So, we are going to look at the likely impact of the recent surge in the unemployment rate on home prices in the United States as a whole, as well as New York City and San Francisco.
If you are interested: the Python script that I used to build the charts below and make my predictions for home prices is at the bottom of the page.
I have broken the rest of this post into two sections. First, I answer the question posed, and make a prediction for future home prices. After that I will give a brief description of how this can be accomplished with Python (including the full script that you can run!).

## What has been the impact of the COVID-19 corona virus lockdown on the U.S. Unemployment Rate?

This is more than a little worrying. The most recent unemployment numbers just came in at 14.7%. This is a massive increase from the prior range of 3%-4% over the last few years. This is even higher than the peaks seen in the 1970's and following the 2008 financial crisis.
Source:
Turning to home prices, during the last serious financial crisis of 2008, we can see that home prices in the United States declined significantly. It is safe to assume that the recent unemployment numbers forecast another decline in home prices over the next few years - and possibly even greater than the decline seen in 2008.
Source:

## How much are home prices likely to decline?

If we assume that the past relationship between the Unemployment Rate and the U.S. Home Price Index holds over the next year or two, then this points to rather large (massive) declines in the value of homes across the United States.
If we run a simple OLS Regression with the Scipy module in Python, we can see that there is a negative relationship between changes in the unemployment rate and home prices for the US as a whole, New York City, and San Francisco.
In the below three charts we are regressing the change in Unemployment Rates against the change in each respective Home Price Index.

### San Francisco Home Price Index

Using the slope and intercept from each regressions above, we can make a prediction for the change in the Home Price Index for each series. Below we are using the most recent change in unemployment rates to compute the change in each respective Home Price Index.
Run the script at the bottom of this post, you should get the following (as of May 12, 2020) .