Question: How did the April real estate market compare to what you would have expected if we weren’t going through the COVID-19 pandemic?
Expectations vs Reality
The 2018 Amazon HQ2 announcement sent demand up and supply down, creating a frenetic real estate market across Arlington and Northern VA in 2019 (2019 Review One and Two). The party continued into 2020, with rapid price growth and intense competition amongst buyers, setting the stage for the market to establish new highs. It also seemed that the volume of new listings would finally go up, after YoY increases in December and January, the first YoY gains since October 2018.
All of those expectations were put on hold when the Coronavirus outbreak shut down the economy two months ago. For the first 4-5 weeks, the market froze up, with buyers and sellers unsure if we were on the verge of a market collapse and how to safely navigate critical real estate activities. Over the last few weeks, demand seems to be coming back and there are signs that sellers are more confident in listing their homes, which should lead to more supply.
April 2020 Market Report
April was our first full month living with Stay-At-Home orders, so let’s take a look at how last month compared to April 2018/2019 and February 2020 (last full month of normalcy).
Extremely Low Supply
Low supply was part of every Arlington real estate conversation in 2018. Then Amazon came and supply got so bad that the County Board launched Housing Arlington, but 2019 felt like the trough. Then COVID-19 hit and April 2020 produced 18% fewer homes for sale than April 2019.
The condo market has been hit the hardest by low supply with an unfathomable 55% decline in condo listings in April 2020 compared to April 2018.
For additional context, new listings in April are usually 25-40% higher than in February, but this year they were only 10% higher and actually lower in the condo market.
Sharp Decline in Demand
Given the on-going competition and mostly stable housing prices, it may come as a surprise to those actively searching for a home that demand has dropped off significantly.
The rate of properties going under contract compared to the new supply dropped to pre-Amazon levels and the number of homes selling within one week of being on market dropped significantly. Condo demand suffered the most which I think is due to a combination of health concern about being in common areas and because it’s easy to delay a condo purchase with an extra 6-12 months of renting a comparable apartment.
While many homes are still getting great offers, sometimes multiples, I do see more homes sitting on the market that probably wouldn’t have in a non-COVID market. Homes with large buyer pools had so much demand before the virus that they can afford to lose a chunk of the buyer market and still generate strong interest. Homes with a more niche buyer market have had their smaller buyer pool evaporate in many cases and should prepare for a longer sales timeline.
Prices Seem Stable
The Coronavirus’ impact on pricing is still to be determined because it’ll take a while to build up enough data points to draw a reliable conclusion. Based on my experiences and those of my colleagues, it seems that there has been little or no impact on prices for most properties (with the exception of niche home, mentioned above), which can be attributed to relatively parallel declines in supply and demand.
As society adjusts to new norms and the science community continues to bring us promising news on treatments and a vaccine, I think that we’re likely to see more confident buyers and sellers over the next couple of months, which will translate into higher demand and more supply. The impact on competition and prices will depend on which moves faster, but I expect demand growth to outpace supply, at least in the next 4-6 weeks.
The big unknown is if/when there will be another seismic jolt to our health and job security that will send sellers and buyers out of the market. It seems this fall is the most likely window for a second shockwave, but this summer is shaping up to be a strong real estate market locally.
If you’d like to discuss buying or selling strategies in this market, don’t hesitate to reach out to me at Eli@EliResidential.com.