The effects of the COVID-19 pandemic have been swift and far-reaching, with the U.S. real estate market seeing its fair share of change and uncertainty. Forced to adapt to shelter-in-place orders, many buyers and sellers are evaluating the situation from home while agents and developers adopt virtual strategies to help their clients. We asked several industry professionals to share their experiences with navigating the market under the strange, new circumstances—and their predictions for the future.
How Has the Housing Market Reacted So Far?
At this point, it seems likely that the usual springtime uptick in real estate listings and sales will be pushed out. Over the past few weeks, around half of U.S. sellers pulled their homes off the market according to Realtor.com, which noted a 47% decrease in year- over-year listings so far in April. As anticipated, total home sales declined around 30% in March, although April figures are expected to show a fuller picture of the impact.
Many agents report that they’re still receiving inquiries, although restrictions on in-person showings and general market uncertainty are slowing the process down. “It has been a very tumultuous time,” says Nate Cole, a Los Angeles–area agent. “With California’s safer-at-home policy, the market has come almost to a standstill. Nothing can compare with seeing a property in person, so it seems pretty clear that sale activity will be slowed until that is more widely available again.”
“While in-person property showings in New York City are currently on hold, interest is not,” says Mickey Conlon of Douglas Elliman Real Estate. “Many prospective buyers are using this time to assess their options and reevaluate their needs.”
A key challenge for buyers right now may be acquiring a mortgage as banks temporarily tighten lending rules. JPMorgan Chase, one of the country’s largest lenders, recently announced a decision to require borrowers to have at least 20% down and a credit score of at least 700. Other lenders are requiring verification of employment on the day of a loan closing, and applications for U.S. government–backed mortgages now include stricter guidelines. Agents report that most signed contracts are proceeding in escrow as planned, although the new mortgage rules may impact future buyers unless they make an all-cash offer.
How Is the Buying Process Adapting?
For properties still on the market, limits on in-person showings mean agents are using new tools to communicate with prospective buyers. David Parnes of The Agency notes his team’s use of social media to fill the gap. “Digital marketing has become key,” he says. “We are using Instagram Live segments or Zoom meetings for virtual tours and property videos to continue our marketing efforts. We are also seeing an increase in interest on our leased properties from clients who are selling a property and need to relocate.”
Other steps in the buying process are also adapting to social distancing. For instance, some home inspectors are touring properties alone while the sellers are away, then conducting video calls to review the findings with the buyers. Home appraisers report doing their work without going inside a property, reviewing the exterior and using public records to establish a value. Closings are also proceeding, with some state governments permitting online closings and other groups sitting in separate rooms to avoid large conference-room gatherings.
It’s unclear how long such steps will remain in place, even if other social distancing requirements loosen. Of course, all of these precautions, while slowing down the process in some situations, are efforts to protect the safety of buyers, sellers, and everyone involved.
Is Now a Good Time to Buy or Sell Property?
Ultimately, that depends on your situation and local area. “Patience is key right now,” says Demetri Darmos, principal at Astéras, a design and development firm. “It’s difficult to predict how the pandemic will impact the real estate market in the long term.”
Jim Anhut, director at the School of Hospitality Business at Michigan State University, suggests that buyers interested in a spec home or vacation property may be able to get a better deal in the current climate. “Homebuilders may want to move inventory and create cash flow, while folks who rent vacation properties may be interested in unloading ahead of a slow rental season,” he says. “Ultimately, cash is king—those with cash to invest will be in a great place to drive a bargain.”
The luxury end of the market is experiencing similar dynamics in the short term, although the strength of regional markets is expected to hold. Jacqueline Urgo, president of development advisory The Marketing Directors, agrees: “As a result of the pandemic, many prospective buyers have put their home search on hold, effectively reducing the size of the buyer pool. When the pandemic ends, we expect there will be pent-up demand for new homes, which means competition will only increase for those who choose to delay their purchases.”
“We expect that unique, well-priced homes will generate significant market interest,” adds Douglas Elliman’s Mickey Conlon. “Historically low interest rates are predicted to remain available in the financing market for the foreseeable future, which typically generates growth in the housing market. The rental market remains strong, but many tenants have been marching in place for the past couple of years, awaiting the right time to buy. For the first time in years, low interest rates combined with market-sensitive pricing has created a compelling case for purchasers calculating a rent-versus-buy analysis.”
What Lies Ahead?
While no one can predict the future, many agents remain optimistic about the market. Parnes believes that once the stay-at-home order is lifted, activity will pick up with the ability to restart showings and open houses. “[The L.A. market] was at the strongest it’s been in 10 years, and much of that energy, supply, and demand is still there,” he notes.
Palm Springs agent Jesse Huskey puts it this way: “I’m extremely confident in the market’s future. Real estate has always been a safe haven for investors during times of volatility, and where you call home has never meant more than it does now. I have to imagine that after this is over, Palm Springs could see a huge influx of big city residents looking to relocate.”
Rachel Street, designer extraordinaire and host of the DIY Network show Philly Revival, also remains optimistic. “Perhaps we will see fewer buyers out there looking for their dream home, but [in the long term], more people may consider real estate as a viable investment strategy versus the risks of the stock market,” she says. “Investing in real estate provides a tangible asset that affords a variety of options—including holding, selling, renting, or living in the property—depending on personal needs and the market. One thing is for certain: people will always need a place to live.”