WASHINGTON, D.C. – (By Dale King, Realty News Report) – Home sweet home is no longer the mahogany-furnished, sampler-hanging-on-the-wall, brownies-in-the-kitchen domicile where folks like Ozzie and Harriet once resided.
Then, the 21stcentury arrived two decades ago, replete with high-tech accoutrements and hand-held electronics that changed the manner of at-home behavior and the nature of interpersonal relations.
Another major lifestyle change struck again just two months ago when billions of people around the world found themselves facing “stay home, stay safe” demands that warped their lives. Home suddenly became a shelter, an office, a classroom, a medical facility and safety zone. Coronavirus twisted normalcy and brought fear of an invisible enemy that could sicken or kill with scant warning.
Coronavirus has taken hold in all 50 states, stalling a humming, high-octane American economy and causing at least 26 million citizens to lose jobs in the face of shuttered stores and restaurants bereft of diners and the closing of “non-essential services.”
The situation has generated volumes of predictions about the future of schools, businesses, families, churches and government. Every enterprise from mom-and-pop shops to multi-million dollar businesses have hit the “pause” button or diverted to the manufacture of COVID-fighting apparatus.
The real estate market has become the barometer for the nation. Experts, researchers, Realtors, scholars and prognosticators are trying – with limited success – to chart a course to bring back better days while salvaging a staggering housing marketplace.
Home sales “all but ceased this spring” as the world anxiously awaits a vaccine for COVID-19, said Ken H. Johnson, an economist in the College of Business at Florida Atlantic University in Boca Raton, Fla. “And the fallout could be similar to what occurred during the historic collapse more than a decade ago.”
“Not many house hunters will feel comfortable making such a major decision during the pandemic,” the educator said. “And those who do likely will have trouble getting financing. What’s more, social distancing requirements have curtailed in-person house visits, and virtual tours aren’t an adequate substitute for many buyers.”
For weeks, the ultimatum that citizens wear protective masks when venturing outdoors has growth from a suggestion to a legal edict. Meetings, movies, live theater shows, religious services and gatherings of more than 10 people have been shuffled out of offices and auditoriums and onto Zoom platforms, Facebook and YouTube. Auto travel has declined so ferociously that oil is selling at low, sometimes negative, prices.
Still, the coronavirus impact on the U.S. is spotty. Some states, particularly in the Northeast, the West Coast and Pacific Northwest, have been slammed. The Midwest has fared much better.
Despite pockets of activity, pending U.S. home sales were down 54 percent for the seven days ending April 10 this year compared to 2019, said real estate brokerage Redfin. And while pending sales are declining, pent-up homebuyer demand is strengthening because many sellers are either sitting on the sidelines or pulling their properties off the market.
Currently, said Redfin, 750,000 homes are for sale across the US compared to just under a million at this time last year. The median listing price fell from $309,000 to $305,000 during the seven days ending April 10, since demand remains high and supply is low.
The real estate industry had to morph – and it did, leaping from a face-to-face to screen-to-screen industry, becoming dependent on virtual house tours rather than in-the-flesh home visits. Filling out contracts online — a practice already gaining popularity – has taken off. Redfin agents like Mara Gemond in Virginia say these technological breakthroughs are here to stay.
The National Association of Realtors recently assessed the switchover to virtual selling this way:
“A quarter of Realtors with clients putting contracts on homes this week had at least one do so without physically seeing the property… For those clients, the median number of homes toured – either virtually or in person – was just three. NAR’s 2019 Profile of Home Buyers and Sellers found buyers typically looked at nine homes before placing a contract on a home.”
Redfin has taken the technology road to heart. In fact, its website encourages customers to “tour homes without leaving your couch.” The company recently began piloting its Direct Access technology for vacant listings in Denver, Houston and Las Vegas. The program had only been available on residences the firm owns through Redfin Now, but “demand from buyers and sellers prompted us to roll this technology out to homes listed by Redfin’s agents.”
In a recent report, Redfin outlined how the real estate trade has backpedaled this year to deal with COVID-19. “At the beginning of March, the housing market was stronger than ever, with February marking the eighth straight month of increases in home sales and the U.S. economy was relatively stable. By the end of March, that run had come to an end and everything had been thrown into extreme disarray as the spread of the coronavirus turned the housing market upside down.”
The downturn was hard on the Redfin company, which laid off 7 percent of its workforce in early April. At the same time it furloughed about 40 percent of its agents.
By April, Redfin said, “home sales slipped and the number of homes listed for sale plunged, although the U.S. median home sale price continued to increase, gaining 7.1% year over year and 3.3% month over month to $303,200.”
“March home sales, which were only partially impacted by the coronavirus shutdowns, dropped 9.1% nationwide from February — the largest decline on record. Home sales also fell 1.2% year over year in March, the first decline in nine months, and by the last week of the month were down 11.5% from the same period a year earlier.
April wasn’t altogether awful, said Redfin. “For the seven days ending on April 19, home-buying demand was down 19% after dropping as much as 34% at the beginning of April.”
Still, not every agent’s fears were assuaged as money woes tossed a proverbial monkey wrench into the mix. “My clients just accepted an offer with 30 days for the buyers to get their financing approved when it should have taken two weeks or less,” said Irma Jalifi, a Redfin agent in Houston. “I worry the house will be off the market for a month and the deal still won’t come together. In this market, you’re damned if you do, damned if you don’t.”
The Houston market had strong sales in March, but pending sales data points to a decline in April. In addition, a sharp downturn in the energy industry has resulted in layoffs and further oil prices declines will inpact the Houston residential market.
So what lies ahead? NAR Chief Economist Lawrence Yun said: “Expect second quarter home sales activity to slow down with the broad observance of stay-at-home orders. But sales will pick up when the economy reopens as many potential home buyers and sellers indicate they’re still in the market or will be in a couple of months.”
Surprisingly, said the NAR economist, “Home prices remain stable as deals continue to happen with the growing use of new technology tools. Remarkably, 10% of Realtors report the same level of or even more business activity now than before the economic lockdown.”
FAU’s Johnson said if an effective treatment or vaccine for COVID-19 can be created soon, home prices should only drop 5 to 10% “followed by a quick recovery.” But a protracted search for a cure could set the housing market back to levels of the recession of 2006-2011.
Does that mean properties will lose half their value or more? “I think it’s more likely we won’t,” he said. “But we have been there before.”
He added: “With a ceased housing market, we will have to revert to gut and common sense to tell us what will happen.”
Housing economist Ralph McLaughlin of Haus Inc. recently authored a report indicating that home prices may actually improve in some markets. Governmental supported programs to encourage mortgage companies to provide forbearance and allow homeowners to delay payments will give a lift to the housing market.
The third quarter still seems to be the odds-on-favorite choice for a turnaround – or at least the start of a recovery. But a market fully restored to its robust early 2020 vitality is still a long way off, says a prediction from Freddie Mac, the government-owned corporation that buys mortgages and packages them into mortgage-backed securities.
“The depth and duration of the pandemic is unknown. While some economies overseas are already recovering, the contours of the recovery vary by country, which makes forecasts of economic activity much more uncertain than usual, Freddie Mac added.
“We assume that most of the economic damage from the virus is contained to the first half of the year. Starting in the third quarter a recovery begins, but it takes a full year before the economy gets back on its feet.”
“With much of the country under stay-at-home orders,” Freddie Mac stated, “We expect to see housing markets deviate from their typical spring surge. At a seasonally adjusted annual rate, home sales fall 45% in the second quarter of 2020. Home sales bounce back but take a year to recover to the level reached in the first quarter of 2020.”
April 27, 2020 Realty News Report Copyright 2020