What happened

Real estate stocks plummeted across the board on Thursday, as fears that the COVID-19 coronavirus pandemic would drive the U.S. economy into a recession intensified.

Shares of Zillow (NASDAQ:Z) (NASDAQ:ZG), Redfin (NASDAQ:RDFN), Meritage Homes (NYSE:MTH), Lennar (NYSE:LEN), NVR (NYSE:NVR), PulteGroup (NYSE:PHM) and Toll Brothers (NYSE:TOL) all fell more than 12% on Thursday.

So what

There are now more than 1,300 confirmed cases of COVID-19 -- the disease caused by the novel coronavirus -- in the U.S. Government leaders are warning that the outbreak is likely to worsen, with many more people potentially becoming infected in the coming weeks. 

The financial markets have been hit hard in recent days, and they plunged again on Thursday after President Trump's promises of tax cuts and the Federal Reserve's plans to inject more than $1 trillion into the financial system failed to calm investors.

Housing-related stocks were also jostled by predictions that coronavirus fears would weigh on home sales during the key spring selling season. A recent survey by the National Association of Realtors (NAR) showed that 16% of agents were seeing reduced buyer interest due to coronavirus concerns. 

NAR chief economist Lawrence Yun said in a statement to real estate reporters that he expects that the COVID-19 outbreak will result in a 10% decline in home sales in March and April. "Given that a home transaction is a major commitment, the uncertainties on how the economy will play out and the spread of the virus itself are barriers to home-buying and selling," Yun said. "The stock market crash is no doubt raising economic anxieties, while the coronavirus brings fear of contact with strangers." 

A person looking at a miniature house while holding his chin in a pensive manner.

Housing-related stocks fell hard on Thursday on fears that the COVID-19 pandemic would cause potential homebuyers to reconsider their purchase plans. Image source: Getty Images.

Now what

If the COVID-19 outbreak does drive the U.S. economy into a recession and cause people to pull back on their home purchase plans, the real estate market could be in store for a major setback in the months ahead. In this scenario, housing-related stocks would likely remain under pressure.

That said, some housing stocks -- such as Redfin -- are beginning to trade at attractive prices. Shares of the rapidly growing discount brokerage have been nearly cut in half in recent weeks, and long-term minded investors may wish to consider picking up shares at a discount -- particularly if the market sell-off continues in the coming days.