Question: What has been the impact of the Coronavirus/COVID-19 on the real estate market?
Answer: What a difference a week makes. Last Tuesday I started off semi-apologetic for writing what felt like a click-bait article at the time and this week it feels like writing about anything else would be absurd.
Last week I wrote that the impact of COVID-19 on real estate thus far was business as usual with a few big “What Ifs.” Those What Ifs came to fruition within 24-72 hours of Tuesday’s column – major changes to our daily routines (school closures, work closures) and significant changes in the global/domestic economy.
It is no longer business as usual in real estate, but the show still goes on for most buyers and some sellers…for now.
This week and in the following weeks I will do my best to communicate the impact of the Coronavirus on the local real estate market through my experiences, experiences shared by my colleagues/industry partners (inspectors, lenders, etc), and market data.
What I’m Seeing/Hearing
Combining the reactions of my clients and clients of the 15-20 agents I’ve spoken with over the last few days to gauge shifts in supply (sellers) and demand (buyers), it seems that many/most buyers are staying the course with their purchase but the jitters seem to be setting in more over the last couple of days, especially for those who also need to sell a home. Sellers are much more nervous, understandably so, and many are questioning their need/plans to sell their home.
Most agents experienced noticeable drops in Open House and showing traffic over the weekend, although I spoke with a few agents who hosted 20+ groups during an Open House. My guess is that there are fewer people visiting homes who aren’t serious/ready buyers and that usually makes up a large percentage of total foot traffic.
Many of the agents I spoke with who submitted an offer this weekend still found themselves competing against multiple offers with strong terms, but the number of competing offers seemed less than what they would have expected a few weeks ago. I experienced this on a house in South Arlington that 2-3 weeks ago would have probably gotten 5-10 offers, but my client was up against just one or two, albeit strong, offers (they won!).
I think one of the best measures of buyer demand/activity is home inspection bookings. 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 he shared some valuable insights on his activity, as well as regional and national activity.
Almost all of Ken’s business is in Northern VA and during a hot market (like the last 8 weeks) he’s often booked out for 5-7 days. His schedule is full this week Monday-Wednesday but wide-open starting Thursday, which never happens.
In Virginia and Maryland, their bookings are down 15% from where they were last week and they were projecting a 10% increase in bookings this week over last, given the time of year. Bookings are down about 20% nationally.
Transactions Still Going
There was some concern that transactions would be halted due to courts, appraisers, and loan underwriters shutting down due to Coronavirus but so far everybody is operational, with some adjustments to adhere to social distancing practices.
Arlington County courts, like many others, have restricted walk-in business but essential services are still available which includes e-recording of deeds (allows property ownership to officially transfer). Lenders and appraisers are still operational, but people should prepare for longer turn-around times. The slowdown on appraisals is actually due to the massive spike in refinancing over the last few weeks when mortgage rates dropped to all-time lows (spiked back up last week due to heavy volume).
Unfortunately, virtual closings aren’t widely accepted yet so buyers and sellers do need to sign in-person in the presence of a notary, so somebody in quarantine or older buyers/sellers who don’t want to mix with the rest of the population will need to take steps to ensure safe distance and cleanliness in order to sign paperwork.
What To Expect
Nobody knows what life and the economy will look like 4-8 weeks from now, but at this point in time, it’s my takeaway that supply is likely to take a bigger hit than demand, but both will have a noticeable drop-off.
It’s still a little too early for me to use listing and contract activity data to see how the market is reacting, but I’ll have enough to work with by next week’s column to present actual market data.
Stay healthy everybody!