Question: What has been the impact of the Coronavirus/COVID-19 on the real estate market?
Answer: I hope you are all staying healthy and sane(ish). My wife and I are trying to wrap our heads around school being canceled through the end of the academic year…yay!
Over the last two weeks, my Coronavirus columns (one and two) have included mostly anecdotal evidence on the impact of COVID-19 on the real estate market, but now we’ve been in this for long enough that I can start using market data to measure the true effects. It will be at least a few more weeks before we can measure the effect on prices, but we can look at things like supply, showing activity, and contract activity now.
What I’m Seeing/Hearing
This past weekend, most Open Houses were canceled and over the last week showing activity has dropped off dramatically. However, there are still plenty of active, motivated buyers making offers. What I’m seeing/hearing right now in the DC Metro market is that competition is down, prices haven’t taken much of a hit (yet), and new listings are still coming onto the market.
Mortgage rates had their most volatile week ever last week as investors basically stopped buying mortgages on the secondary market, but the Fed stepped in and has promised to stabilize the market until our economy [hopefully] returns to normal. Here are two (one and two) good reads on what happened last week to mortgages.
Impact On The DC-Area Economy
While not real estate specific, I want to share the excellent work of Jeannette Chapman, Director of the Stephen S. Fuller Institute at our very own George Mason University, which takes an in-depth look at how Coronavirus is likely going to impact the DC-area economy, based on current projections. Notably, they determine that the DC-area will not be as insulated from this recession as the 2008 financial crisis. Be smart, be careful with your money folks.
While I’m slightly off the topic of real estate, I wanted to share a great website for tracking global and domestic COVID-19 data in real time, with helpful visuals. This website was shared with me by Arlington resident/Mom Elissa David, who owns the Unbroken Body to help Moms heal their bodies after pregnancy. She has temporarily turned her website into a resource for all of us parents who have suddenly become home school teachers!
Now let’s jump into some relevant real estate market data.
The number of new listings this past week in Arlington jumped 27% over the same week last year and 6% over two weeks ago. The DC Metro experienced less dramatic increases in new listings, but increases nonetheless.
Anecdotally, it seems many homeowners who were planning to sell in the next 4-8 weeks are accelerating their timeline, fearing the uncertainty of the future economy. A boost in inventory from motivated sellers while demand continues to fall (see below) could lead to a drop in prices in the near future.
Nationwide, the number of listings pulled off the market spiked over the past week.
|Time Period||Arlington New Listings||ArlCo+FfxCo+DC+MoCo New Listings|
|3rd Wk March ’19||66||1,253|
|Two Weeks Ago||79||1,280|
|Three Weeks Ago||86||1,315|
The average number of showings per listing in Arlington (first chart) have dropped each of the last four weeks from 10.44 showings four weeks ago to 2.91 showings this past week.
Showings in Washington DC have dropped by 41.4% compared to this time last year. The tool I have to generate this data only offers statewide info, so I chose to use Washington DC (yes, I know it’s not a state) instead of Virginia because the Washington DC market is much more reflective of Northern VA than the Virginia market. Showings are down 32.9% across North America.
While some buyers still find themselves competing with other offers, the amount of competition in the market is down significantly. From the first week of February through the first week of March (five weeks), 61% of homes listed for sale in Arlington went under contract within seven days. Two weeks ago (first full week of our daily lives being disrupted by COVID-19), that dropped to 52%, and this past week only 33% of homes listed went under contract within seven days (that number will likely increase into the 40s over the next 2-3 days).
It’s worth noting that the market would normally be selling even faster this past week than it did the previous 5-6 weeks as we move into peak buyer demand season.
What Other Industry Service Providers Are Seeing
I spoke with some other industry service providers to see how their numbers looked over the past week. The title attorney and lender I spoke with saw a significant spike in the number of ratified purchase contracts they received. On the other hand, the inspector I work with saw their numbers drop dramatically.
I spoke with Ken Humphreys, the Area Manager of Virginia and Maryland for BPG Inspections, one of the largest inspection companies in the country, and their total inspection in Virginia and Maryland were down 37% last week. They’re currently on pace to be down 45-50% this week.
Sarah Anderson, Managing Attorney for Universal Title’s Arlington Office, shared with me that they received 35 contracts last week. They had received 75 contracts over the previous three weeks combined.
Jake Ryon, a Loan Officer with First Home Mortgage, told me that he’s been averaging 2.2 purchase contracts per week this year, and last week he received eight (crazy!).
A local lender I spoke with surveyed their appraisers on COVID-19 related questions and learned the following from 272 respondents:
- 7.35% are no longer performing interior inspections
- 47.43% are performing interior inspections but will likely stop if the situation deteriorates
- 45.22% anticipate being able to perform interior inspections with precautions for the duration of the situation
- 22.06% have heard from at least 1 borrower, Realtor, or entry contact who will not permit the property to be inspected
While the future of public health and our economy are still extremely uncertain, the best anybody in the real estate industry can/should offer is a pulse on the current market with a very short-term outlook. Be wary of any advice you receive about what markets/life look like 3, 8, or 20+ weeks from now because nobody knows. Be especially wary of anybody promising that this will be a blip in the market and we’ll be back to normal come late summer (I’ve heard a lot of this talk).
In times like these, buying and investment decisions should be made based on long (5+ year) time horizons and you have to plan for best- and worst-case scenarios. If you’re considering selling your home, you have to acknowledge the massive amount of uncertainty even just a few weeks from now.
Be smart, be careful, be strategic. And stay home!