Nearly every real estate expert and economist predicted 2020 to be one of the most competitive spring markets on record. Most statistics, with the exception of low available homes for sale, have been on a positive trajectory since January. Homes are still selling, especially at and below the mid-range of properties up to about $700,000. And there are still many multiple offer scenarios below the $550,000 range.
Probably until sometime in May, the market will experience a noticeable slowdown, as many sellers have temporarily withdrawn their homes due to COVID-19. The number of buyers who are out looking for homes is lower, and those who are looking likely have a compelling reason.
The average price of both attached and detached homes was up 7.3% over March 2019. Showings in March peaked between the 4th and 10th but dropped by 50.4% by the end of the month when stay-at-home orders were issued, according to REColorado. Megan Aller from First American Title recently suggested, “The Spring market has been delayed.” This probably means the market will improve with growing demand between June and August. For the time being, buyers will generally rely on video chat walkthroughs and other technologies such as 3-D virtual showings, to quench their thirst for open houses and broker tours.
When stay-at-home orders are lifted and buyers begin to visit available homes again, every broker should provide the new “in” gear of gloves, masks, and booties. Realtors should turn on all lights and open doors so people won’t touch items unnecessarily. Appropriate social distancing will likely occur for the better part of this year. The title and mortgage industries are helping the cause by offering curbside closings, remote notaries, and drive-by appraisals when possible.
Life has literally changed for everyone. The only normal is a new one! Our homes have never been more important to us than they are now. We have been learning quite a bit about ourselves, our habits, what is important, and what is not. There are many new realities that will stay with us for the remainder of the year, and in some instances much longer.
The norm for most brokers is to answer questions and address topics or concerns related to how the “market” is doing, where interest rates stand, how quickly homes are selling, and is it a good time to buy or sell? I’m beginning to hear about new concerns, ideas, and lifestyle questions. People are recalibrating, trying to find a better balance in their life. I’ve had conversations about more storage space, a larger pantry, better home-office arrangement, and even a nicer patio/yard/garden area. There are families needing or wanting to combine two and three generations, which became more common during and after the 2008-2011 recession. I suspect there may be more retirement plans taking place and I recently saw the first TV advertisements for a divorce attorney. Unfortunate sign of the times.
The White Elephant question related to potential buyers and sellers is, “what is going on with property values?” The best answer lies somewhere between we don’t really know, and no tangible difference. Historically, the real estate market, unlike the stock market, tends to change slowly from month to month as it relates to values. Prices remained on the rise after the 1987 recession (when mortgage rates were 12-14%), and again after 9/11, with sales slowing during those events. The only time home prices have declined was during the recent great recession, due to overbuilding (high supply) and terrible (lax) lending standards. Over the last 10 years, financial institutions have tightened significantly, and loans are now made to creditworthy consumers only … not merely anyone with a pulse. Long story short, real estate-related industries brought us into the great recession and real estate demand, along with lowered interest rates pulled us out. Contributing to that (more than subtly) is how for every house sold, well over $70,000 of revenue is fed into the economy in goods and services, such as lending costs, title insurance, real estate fees, new carpet allowances, movers, flooring, and window coverings, etc.
Everyone entering this new real estate landscape, after social distancing and quarantine measures are relaxed, will decide how and when to address their wants and needs. There is definitely a high level of pent-up interest from both buyers and sellers (who may also be buyers). Online demand has been holding steady with engagement in real estate portals much stronger.
Home prices are obviously an important factor, but pricing may not be quite as important as other factors, such as timing. Values may or may not continue to climb this year, but with high demand, low interest rates and low inventory, prices will likely not get soft. With some exception of sellers waiting for this crisis to break, you may be surprised to find less seller vulnerability or an overblown sense of despair. Buyers may see some discounting by taking a level-headed and respectful approach to negotiating, as most lowball offers are ignored.
This year’s winners will be those who figured out how to better meet family needs, with incredible interest rates (@3.75%, it’s $37.50 per $10,000 borrowed over 30 years). Now more than ever, consumers will require a true professional and experienced broker to help them navigate options and understand new guidelines.