How COVID-19 Is Affecting Real Estate And The Housing Market
Spring is typically considered the best time of year to buy or sell a home, but this year, real estate transactions are slowing to a halt. With COVID-19 cases still affecting many areas across the U.S, the uncertain stock market, millions of businesses being closed, unemployment numbers rising and millions of Americans being mandated to stay at home, there is a lot of uncertainty. It’s no surprise that the housing market has also taken a substantial blow.
You may have clients who are planning to buy or sell a home now, yet they’re unsure of where they stand. As federal and local governments continue to enact new rules for our new reality, it’s hard to know what to expect. To help make sense of what COVID-19 means for the housing market, we’ve gathered the latest information on home purchase trends, so you can guide your clients on where the real estate industry and housing market is headed.
How State Mandates Are Impacting The Real Estate Industry
Real estate transactions typically require many in-person interactions, from open houses and showings to appraisals, inspection and closings. As states enact shelter-in-place orders, there has been an extreme amount of confusion surrounding the real estate industry. While the rising number of COVID-19 cases has created plenty of uncertainty in its own right, the fact that individual states have been left with the task of setting new policies has aggravated the situation.
State officials have responded with varying levels of restrictive measures. The lack of alignment on business closures has left individual cities and states scrambling to determine what qualifies as an essential business. While supermarkets, pharmacies, banks, transportation and health care facilities clearly fall under the category of essential, there is little consensus as to whether or not real estate services should qualify.
In New York and California, real estate agents have been told that they must conduct business from their homes, which has led to a vast increase in virtual showings.
“As coronavirus news continues to dominate the headlines and everyone looks to take social distancing seriously, buying and selling a home the traditional way with guided tours and handshakes is now out of the question,” says Corey Walters, CEO of Homeworthy, a digital home-selling platform based in the Pacific Northwest. “Like so many industries across the country and world right now, the real estate market is sort of waiting with bated breath as rules and regulations continue to unfold.”
How COVID-19 Has Affected The Housing Market
Recently, the National Association of REALTORS®(NAR) conducted a series of flash surveys to gain better insight into how COVID-19 has been affecting consumer behavior in the housing market. Having now conducted three surveys, the first two in March and the third on April 6,NAR was able to compare the results to determine how the industry’s pulse has changed. Their findings, as well as observations made about local housing markets, paint a clearer picture of how these unprecedented circumstances have affected real estate across the nation.
How COVID-19 Has Affected Real Estate Buyers
Among NAR’s three studies, buyer interest dropped significantly. According to the April 6 survey, 90% of REALTORS®cited a decline in buyer interest. 45% reported a decline by more than 50%. An interesting fact: 27% of those REALTORS®who work with buyers had at least one buyer who put in a contract without physically seeing the home in the last week.
It’s clear that COVID-19 is influencing home buyers’ actions. “The housing market in each state we operate has clearly been impacted by COVID-19. However, we believe the impact to date is negligible compared to the upcoming months,” says Glenn S. Phillips, CEO and lead economic analyst for Lake Homes Realty, a 29-state real estate brokerage firm. “In the most recent few weeks, COVID-19 fears were minimized by most. At the same time, many were excited about the drop in interest rates. This leads these two factors to offset each other to some extent. Moving forward, the housing market will be far more influenced by COVID-19 than interest rates.”
The most recent NAR’s survey also indicates that home buyers are planning to delay their home purchases due to the COVID-19 situation. 59% of REALTORS®reported buyers are delaying their home purchase for a few months. 13% reported that their buyers are continuing the process but only relying on virtual communication.
Positive News About Technology And Social Distancing
There is some positive news that indicates home buying is adapting to the current situation. According to the April 6 NARS survey, 84% of REALTORS®are using e-signatures, 58% are using virtual online tours and 73% are using social media.
How COVID-19 Has Affected Real Estate Sellers
As cases of COVID-19 increased across the country, sellers’ morale was also shaken. NAR’s studies show a clear decline in sellers’ confidence as news about the virus intensified. Although 81% of REALTORS®initially reported that sellers had kept their homes on the market, that number dropped by 20% on March 16. And 16% of agents noted that sellers had decided to pull their homes from the market, marking a 13% increase from March 9. In the April 6 survey, 80% of REALTORS®cited a decline in the number of homes on the market. Of that share, 32% reported a decline between 10% and 30%.
For sellers who have kept their homes on the market, their behavior has become increasingly cautious. Of the REALTORS® included in NAR’s April 6 survey, approximately 93% said that sellers had taken extra precautions when showing their homes. These precautions include canceling open houses, restricting the number of showings and requiring buyers to remove their shoes and wash their hands or use hand sanitizer upon entrance.
Gina Mattern, a real estate agent and advisor for Willis Allen Real Estate in Del Mar, California, says that the last time she showed a property, “The house was vacant, which made the risk for all much lower. I opened the house (wearing gloves) prior to the buyers’ arrival. The buyers arrived 10 minutes later and let themselves in for a self-guided tour. The buyers locked the door upon departure. We did not have any contact with each other. I remained in my car until their departure.” Despite her careful measures, Mattern adds that she would not show a home that was currently occupied, given the increased risks involved.
However, contagions are not sellers’ only concern. Buyers tend to distrust homes that linger on the market, and during these times, the potential for listings to be considered stale is high. To help support sellers whose homes are currently being listed, the Real Estate Board of New York has decided to eliminate the “days on market” calculation from their listings. This move, which will likely be followed in other areas, is intended to assuage sellers’ fears that their homes will receive less attention from buyers once the market recovers.
What To Expect From The Future Housing Market
Although there are some closings currently taking place throughout the country, the number of transactions has been greatly diminished by both the virus and orders to stay at home. Appraisers and inspectors have struggled to gain access to homes, and government recording offices have closed their doors, making crucial aspects of the closing process challenging to complete.
Amidst the growing concerns over COVID-19, the housing market has clearly come to an impasse. The spring selling season will not reflect the vitality it has in previous years. Most sellers will choose to hold off before putting their homes on the market, but those who cannot wait will list now and show their homes virtually. And as the recent NARS surveys suggest, more buyers are embracing e-signatures, virtual showings and social media to complete the process. While the extreme shift in the industry seems alarming, the future may not be as bleak as some expect.
Fritz Frigan, executive director of sales and leasing for Halstead Real Estate in New York City, says that if there’s a dramatic drop in the number of COVID-19 cases and the stay-at-home orders are lifted by mid-June or mid-July, “I firmly believe there will be a really strong push for new properties hitting the market and buyers will come in droves because everyone is now hunkered down and cannot do business. I think this is going to have an incredible effect on the strength of the market once the order is lifted.”
To learn about how the virus is affecting the mortgage industry and what you can do to help your clients, visit our COVID-19 Resource Guide.