There’s no question that the coronavirus pandemic is having a significant impact on real estate. According to
a survey from the National Association of Realtors, 48% of agents, as of March 17, said they’ve seen a notable decrease in buyer interest, a number likely to have increased in subsequent weeks as more states issue orders to stop non-essential business. At the same time,
Realtor.com found that as of March 28, the number of newly listed properties nationwide dropped by 34% year over year.
Sellers, meanwhile, are pulling their listings: in Manhattan,
the number of listings pulled from the market the week of March 16 was up by 276%, compared to the same week the previous year.
In Los Angeles as of mid-March, 45% of agents said their sellers were pausing sales, and 50% said their buyers were doing so. And in California’s San Francisco Bay Area in mid-March,
inventory dropped by 20% in just three days. Some economists are predicting that nationally, home sales
will fall by 35% this spring.
But activity has not ceased entirely, and thanks to technology that allows for workarounds like video home tours and virtual closings, buyers and sellers are still making deals, though delays are to be expected.
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It’s Time for Home Buyers to Drive a Hard Bargain“We are seeing people continuing to move through the process,” said Candace Adams, president and CEO of Berkshire Hathaway HomeServices for New York, New England and Westchester Properties. “Some agents are really good at presenting properties virtually.”
Most activity in the market now is likely stemming from buyers and sellers who already had transactions underway at the onset of the coronavirus crisis. But for those who were planning to buy or sell but hadn’t yet entered the market, now is the time to prepare so that you’re ready to pounce on the best deals as soon as life returns to normal.
“Information is critical—stay abreast of the local markets, and keep in dialogue with local agents,” said Eric Sussman, professor at the UCLA Ziman Center for Real Estate. “Once things return to normal, homes will come back on the market, though we don’t know what kind of re-pricing is going to take place.”
Pent-up demand and diminished inventory could lead to a flurry of activity once the crisis has passed, experts say—or there could be fewer people committing to investments than is usual in the spring buying season, due to economic uncertainty.
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Coronavirus Put a Stop to the Boris Bounce, So Patience Will Be Key for Buyers and Sellers“It might be a wash on either side until things shake out and stabilize,” Mr. Sussman said.
To prepare for either scenario, prospective buyers and sellers must continue to stay informed. It’s also important to make sure, amid market volatility, that they maintain enough financial liquidity in the months to come.
How to Stay Up-To-Date on the Market
Buyers who were planning to take out a mortgage for a real estate purchase before the onset of the Covid-19 crisis should continue that process. Far more Americans are refinancing than are applying for new mortgages, but with rates dropping, there was
a slight increase in mortgage applications in the last week of March.
“Any prospective home buyer who was planning on using mortgage capital to assist them should reinitiate dialogues with traditional and private banks and wealth managers,” Mr. Sussman said.
From Penta: Future Returns: Risks to Corporate Assets from Climate ChangeAlthough the majority of U.S. states have issued statewide orders to close non-essential businesses, many have also enacted policies that provide for the remote filing of important paperwork, allowing for the mortgage approval process to continue.
“Buyers should get pre-approved if they’re going to get a mortgage, and obviously make sure they have enough cash liquidated,” said Kathryn Reddican, vice president of operations at Berkshire Hathaway HomeServices for New York, New England and Westchester Properties. “In New York state, documents can be notarized virtually, and a lot of lenders are allowing for drive-by or walk-by home appraisals.” Moreover, both buyers and sellers can make the most of their time confined at home by thoroughly researching their desired markets and keeping in touch with local agents.
“All you can do is research, learn about the market, and see trends,” said Tamir Shemesh, a broker with Douglas Elliman in New York.
Click to read more New York City luxury real estate newsHe added that buyers can ask their agents about access to homes they’re interested in, as sellers may be willing to offer virtual tours and take videos of their properties.
There are plenty of indications that people are spending more time online: Internet traffic
has spiked, and search engine data reflect that Americans are looking into when they should enter the real estate market.
“There was Google research showing that the term ‘Should I buy a house?’ doubled from February to March,” said Bess Freedman, CEO of Brown Harris Stevens. “You can’t physically go out and do the same sort of looking, but you can go online and look at inventory, floor plans, photos, and videos, and get fluent with what’s out there and available.”
Buyers can also familiarize themselves with the neighborhoods they’re interested in so that when they’re able to physically begin house-shopping, they have a complete understanding of the area.
Sellers must also keep up-to-date in order to determine the right pricing for their homes in this new reality.
“You have to talk to agents. Uncertainty cuts both ways for buyers and sellers,” Mr. Sussman said. “Most agents are going to say wait and see, unless a seller is desperate. But if your desire is to maximize sales price, hold off for a few more weeks at a minimum.”
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What to Expect when the Coronavirus Crisis Ends
The question of how the Covid-19 pandemic will affect luxury real estate depends on how long social distancing and business shutdowns continue. Nationwide, listing inventory
declined throughout March, but with the situation changing every day, whether this will amount to a short-lived disruption or a longer-term slowdown remains to be seen.
Some predict that the decline in inventory, and the difficulty in home-shopping for prospective buyers, means demand will build up and result in fierce competition once business as usual can resume.
“There was pent-up demand coming into this situation, with pending sales up by 15% year over year in the month of February,” Ms. Reddican said. “There will be an inventory issue with people taking their properties off the market, which will cause price escalation and multiple offers once this clears.”
Inventory in the U.S.
was already at record lows before the outbreak of the coronavirus, falling by 14% in January. It’s unclear, though, whether this will mean an explosion of activity and price escalation once the crisis abates, given that economic volatility may make Americans skittish about committing to new investments.
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Private Islands Offer Safety and Status, But Not Investment Stability“We already had low inventory, and not a lot of people selling or moving, so this is certainly going to exacerbate that reality,” Mr. Sussman said. “Will it move the needle materially in either direction? I don’t see that yet.”
Many sellers have yet to adjust to the new reality, economists say, so it may be wiser for buyers to wait and see how pricing changes as time goes on—which in cities like New York may not become fully realized for
six months to a year.
But those who have weathered major crises in the past, from the burst of the dot-com bubble to 9/11 to the 2008 recession, are optimistic about an eventual bounce back.
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The Case for Housing Safe Havens at a Time of Increasing Crisis“People have short memories. Even after the subprime crisis in 2008, the market came roaring back about three quarters later, and continued going up until 2016,” Mr. Shemesh said. “After 9/11, we saw a pause as well, but the market came back as a whole by January.”
It helps, too, that many luxury real estate brokerages were seeing strong activity heading into March.
“We were set to have a phenomenal March,” Ms. Freedman said. “Everything has shifted now, and economists are saying we’ll potentially see a V-shaped recovery, with sales that dropped off a cliff but will bounce right back up because of pent-up demand. I’m rooting for that sort of recovery.”
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