How did housing/property markets behave following mass epidemics in history like the 1918 Spanish Flu? Did housing become super cheap? What generally happened to homes where the owners/families died?

by ShadowHandler
ParkSungJun

The short answer is that it's complicated, and the long answer is that, it's really complicated. I can only really answer the first part of the question, and that's a big question at that.

The problem with analyzing housing markets in the wake of mass epidemics is that plagues have different economic effects depending on the very nature of the disease. For instance, the Black Plague primarily struck down those who were either young or old. From an economic point of view, this creates a supply shock to labor a few years down the road, but that aside from the general chaos and uncertainty that means that the economic damage will not be seen for a few years until the young generation reaches working age. On the other hand, the Spanish Flu primarily struck down healthy young adults due to the nature of the cytokine storm. Thus, it would have an immediate impact on the supply of labor as people who are sick or dying cannot be working. Because of these labor shocks, this creates a few economic drivers: less labor supply against a preexisting labor demand implies that wages will rise. Rising wages means that people can choose to consume more per capita, which could offset the reduced demand by sick or dying people.

Gregory Clark, an economic historian of England who has a very nice dataset of prices and wages from England post 1300, discusses how while rental prices were falling in the 1300s right around the time of the Black Plague, that this fall in prices had been going on before the Plague's arrival in Britain and that he suspects that the plague was in fact exogenous to these housing prices. (see: Gregory Clark, Microbes and Markets).

Knoll, Schularick, and Steger, in their "No Price Like Home," come to a similar conclusion with respect to housing prices. They argue that housing prices were more or less constant prior to the mid 1900s as improved transportation infrastructure made the amount of available land for use much greater: that is, with roads, cars, seaplanes, faster boats, and so forth, people can live further away and still be in a position to go to their workplaces in a manner that is time efficient. By comparison, population shocks like the Spanish Flu had a relatively minor impact on housing prices.

Brainerd and Siegler actually wrote a direct work examining the impact of the Spanish Flu on the US economy (The Economic Effects of the 1918 Influenza Epidemic) but they explicitly exclude real estate companies from their analysis and focus primarily on the impact of the labor force. Their conclusions are similar to the ones above: which is to say, there was an immediate labor shock, and wages went up.

Garrett's "Economic Effects of the 1918 Influenza Pandemic" also reached similar conclusions. What he also noted was that sick people also had lasting damage in the form of weaker human capital: children with sick parents received less education, for example, making them less economically valuable than say, someone whose family did not get sick and was able to fully attend school.

As you can see, the answers do not quite get to your question. Part of the problem is that trade itself is also disrupted during a mass epidemic and data may not be as good as it should be: another issue is that property markets were prone to speculation as it was: Wheaton, Baranski, and Templeton noted that in any given decade in Manhattan real estate prices often shifted 20-50% in real value, thus making dissociating the plague effect with other effects very difficult. It is worth noting that although less people may have needed houses (due to epidemic casualties) it is possible that due to their new wages and temporarily lower prices they were able to purchase a bigger place to live, thus offsetting any immediate demand effect.

MrDowntown

I have trouble seeing how the pandemic would have made an economy-altering difference, any more than the AIDS crisis of the 1980s affected urban property markets. First, the death toll in the US was only 0.65 percent of the population, although a Metropolitan Life Insurance study of those it insured found that 3.28% of that entire population of industrial workers in the U.S. aged 20-50 died. Second, the home ownership rate in 1918 was only around 45% (compared with 65% in the mid 1980s). Third, half of all deaths in 1918 were of people aged 20-40, who (particularly in that era) were unlikely to be property owners.