Real Estate News
THE EFFECTS OF COVID-19 ON REAL ESTATE SO FAR
As of writing this newsletter, Colorado is in the process of moving from a statewide Stay-at-Home Order to a Safer-At-Home-Order to take the next step in our journey to curtail the spread of Covid-19. The number one priority for the past six weeks has been to stay home in order to stay safe and healthy. As we move forward the number one priority is still safety, but we are also looking to allow more people to go to work and to get our economy moving.
In uncertain economic times people get nervous. Not necessarily because bad things are about to happen, but because people begin to believe that bad things will happen. It is called Consumer Confidence. And it is easy to feel this way with the constant drumbeat of negative 24/7 cable and internet news feeds. This has had a negative effect on Consumer Confidence. I am not downplaying the threat of Covid-19—it is real. So is the fact that 30 million people have filed for unemployment since the virus hit, of those 360 thousand in Colorado. The point I want to make is that our people, and our economy, are more resilient than the negative news media will ever report.
Let’s talk about how this affects local real estate. Real estate was listed as an essential business in the statewide executive Stay-At-Home order, however a few weeks in they stopped all in-person showings. It has not been business as usual. However even in a crisis, people need a place to live, and in some situations they have a critical need and find themselves in between homes due to no fault of their own. Over the past few weeks homes have been listed and even sold without a single showing. Of course, once under contract the buyer can inspect the home and do their normal due diligence prior to closing.
When we began March, the market was strong with record high numbers. Showings were up over the same time last year. We had about a one-month supply of single-family homes on the market. (A balanced market is a 4-6 month supply.) We only had 25% of the inventory needed. Sellers were getting multiple offers and buyers were getting outbid. This continued through the third week of March despite all the negative news. The final week of March, showings and under contract listings slowed. Your Castle March closings finished down around 7% over the previous year. Much better than we initially expected.
In April, many sellers decided to hold off putting their homes on the market, or decided to take their homes off the market for a couple months. There were still plenty of buyers in the market. Even if half the buyers dropped out, we still had more buyers than sellers. The buyer demand would have to drop by 75% to create balance in the market, and we did not see anything close to this. Real estate is a supply and demand market, just like all financial markets. Even with fewer buyers in the market, there was still an under supply of homes.
In April homes that were priced right and in good condition were still selling very quickly. We did see buyers being more cautious and spending more time researching online. Homes that showed well online got in-person showings and/or offers, the homes that did not show well online did not get as much activity. The best homes still received multiple offers. Overpriced listings still sit on the market longer, which is the case under any market conditions.
Below you will find graphs of listing and home sales data over the past two months. Take a look, it is quite interesting to see the number of showings and new listings drop off the past few weeks.
What does this mean for the future? Historically we have not been through something like this before, so this is uncharted territory. No one has a crystal ball; however, I am optimistic. When surveyed, most of the top Brokers at Your Castle Real Estate said that they had a huge pipeline of buyers and sellers that still want to buy or sell, they just want to wait a month or two. It makes sense; why take a chance if you don’t have to? We are anticipating that transactions that might otherwise have closed in April, May or June, might now close in July and August, artificially extending the selling season. Of course, there will be some buyers that are out of the market due to job loss, fear, etc. There may also be some sellers that decide not to sell either out of fear or financial hardship. With all the mortgage relief options available, it probably will not be a significant amount.
So far, we have not seen a significant drop in home prices. Since inventory was significantly low before quarantine and there is still plenty of buyer demand, the simple economics of supply and demand keeps prices steady. As we step into this next phase of Safer-At-Home Orders, with in-person showings allowed, we expect those that put their plans to move on hold will start to make plans over the next few months.
We expect that the quantity of homes sold in 2020 will be less than 2019, but fewer closings does not necessarily mean that the homes sold for lower prices. Unless we see a huge increase in inventory we don’t expect prices to drop.
If you would like to know the value of your home now and the market activity in your neighborhood, please give me a call. I look forward to speaking with you.