Currently, real estate markets nationwide are evolving and adapting to the new realities of COVID-19. These new levels of adjustment are present in areas like technology, showing properties, how sellers prepare for showings, lending standards, safety and health considerations, and in general, understanding the psychology and energy of the market.
Recognizing we live in a somewhat different world, I think it begs the question, “what does this mean if I’m buying or selling (or both)?” The largest driver of any housing decision is where and how people may want to live! I will try to help by reflecting on some real estate history combined with current events to provide a clearer perception of the real (estate) world.
America’s financial systems look vastly different today than it did before the Great Recession (2008-2011). Massive changes took place, strengthening lending standards, allowing only credit-worthy borrowers to obtain mortgages. Clear proof of this success is amplified by default and foreclosure rates hitting all-time record lows.
America has had a housing shortage since the recession, with demand for homes consistently outpacing supply. The National Association of Realtors (NAR) chief economist, Lawrence Yun, predicts “that once we get through the worst of this crisis, housing demand will reemerge quickly. Our economic recovery won’t be a slow burn, like the 2008 financial crisis.”
Property ownership has become a financial rock during this economic challenge, and Congress has helped protect this investment, which remains the best opportunity Americans potentially have to reestablish long-term net worth.
In comparison, job losses during the Great Depression occurred slowly over five years, while during this pandemic, unemployment rose dramatically in a three-month period, however not due to problems related to the economy. Jobs have slightly improved (it may take a year or two) and a vaccine will be developed and tested (likely within a year), easing economic stress. In the 1930’s, financial institutions (banks), simply failed, as opposed to having a Federal Reserve immediately getting ahead of the crisis, averting any run on the banks. Yun also predicted home sales (not prices) could decline up to 15% this year, but increase up to 18% in 2021, with modest value increases.
As of May 10th, 8.2% of all mortgages were in forbearance (giving homeowners up to a year’s worth of deferred payments), without impacting their credit. Over four million homeowners are now enrolled in a forbearance program. That number has been flattening the past two weeks, while there have been consecutive increases in weekly mortgage applications, as demand for homeownership grows.
As consistent and potential growing demand combines with hugely inexpensive borrowing costs, it leaves an incredible opportunity for buyers to purchase and build real financial equity, even though it is more of a seller’s market.
Sellers have started to get off the sidelines and homes are selling fast again in most price ranges. Multiple offers are back in fashion for the lower to mid-price ranges. A healthy domino effect starts with strong entry-level to mid-valued home sales. Those sellers are now positioned to purchase the mid to higher price points, bolstering all real estate sales.
Sellers may have the upper hand, but sharp negotiating skills, expert clauses with perfectly written contracts, and knowing how to accommodate sellers can only help buyers. By working with solid, experienced brokers, buyers can navigate through escalation clauses, appraisal contingencies, and desired timing issues. The expertise of a broker is not only valuable in presenting well written offers, but provides the benefit of their preferred inspectors, lenders, and other valued vendors.
New listings and pending sales increased substantially by the end of May, as reported by REColorado. New listings totaled 7,312 in May, up 56.4% from April, but down 16.87% from May 2019. However, Denver not only has new sellers, but ones placing homes back on the market with precautions now exercised. Pending sales in May were amazing, with over 6,800, a 115% increase over April and 12% stronger than May 2019.
The burning topic being asked most frequently is: how has COVID-19 most affected what buyers are looking for?
The nutshell answers are as follows:
— More efficient floor plans
— Flexible spaces/bonus rooms that can do double-duty
— A room that can house a Murphy-bed
— Good storage space (basements or place for storage shed)
— Larger kitchen pantries
— Home office flexibility—no more working in the kitchen
— Outdoor spaces—gardens and patios are highly desired
— Multiple generations living under one roof… includes young adult children, parents, and grandkids.
They may all be a consideration or necessity. Stay tuned! There are more trends and lifestyle dynamics being considered. To learn more or for all of your real estate needs, contact LIV Sotheby’s International Realty by calling 303.893.3200 or visiting livsothebysrealty.com.