How will Real Estate and Home Sales be Affected by the COVID (Coronavirus) Shutdowns?
Although the world of real estate isn't the most important (not by a long shot) impact area from the coronavirus, I thought I would capture the things I am seeing and the trends that are developing here, as its really the one I am most qualitifed to write about.
Impact of COVID on Sellers
We've already seen a significant - but not yet dramatic - effect on listings. Obviously, April/May/June are usually the peak of the seasonal activity in real estate, so this is coming at the big part of the year. Home sellers have worries on a couple of fronts: Will buyers not buy during this period? Will sick people come inside my house? Where do I go during showings? Each of these are hard to answer. The easier answers are that Open Houses, for obvious reasons, are no longer happening across the vast expanse of real estate. Some agents are trying to test out "virtual Open Houses" where the agents live stream a showing of the house - but that doesn't seem to me like it would be all that effective. I've done that a few times, and it's really not the same. You can't really trust the listing agent to show you what you need to see. Eventually your're going to need to see the house.
And agents, so far, are listing new properties and letting private showings - with small groups, typically 3 people - see the houses one at a time. While not ideal, it is a reasonable precaution at this time. Obviously, sellers are still counting on agents and buyers who don't feel well to self quarantine - someone who is clearly not feeling well shouldn't be out looking at houses - but there is still the chance asmptomatic folks could transfer the virus to the home owner if they aren't careful. It is hard to quantify how serious this risk is, however. Things get quite a bit easier if the home is vacant - with noone living in the property, that would really reduce the risk of transmission. Still, however, wipes for door knobs and handwashing would be important pre-cautions, and they would be hard to enforce.
Impact of COVID on Buyers
I know some buyers are putting things on hold. Some are just trying to do strict quarantine. Some are optimistic the market (and prices) will turn in their favor (so far, not so much). In both cases they are putting things on hold. If more buyers put things on hold then sellers, that will bring prices down, perhaps. If more sellers put things on hold than buyers, then prices will go up. With mortgage rates at amazing levels for buyers, housing has gotten cheaper, and buyers willing to deal with the risks of house looking may benefit.
Impact of COVID on Closings
Currently, real estate closings are considered an essential service, so there should be minimal impact here, unless the various attorney offices have numerous and prolonged employee abcenses that affect the amount of work they can do. Things are evolving fast, and most deals are including COVD addendums that indemnify both parties from COVID related delays.
Impact of COVID on Smoke Inspections
As of last week, the Massachusetts Govenenor, Charlie Baker, has issued an executive order that absolves sellers of getting smoke and CO certificates in the current environment. This is likely to protect first responders, as much as anything. Currently, buyers are expected to get the certificates and get re-imbursed by the sellers for the expense. There are a lot of nuances to this, depending on whether you are a home seller or home buyer, and its gonig to cost some folks a lot of money depending on the type of deal they agree to. Be careful, as this is truly new ground.
Impact of COVID on Mortgages
Mortgages and lending, like closings, have been considered an essential service in Mass, and although many lenders are telling some employees to stay home, by and large a lot of the lending isn't affected.
Ultimately, what happens to real estate prices will be sorted out by whether the decrease in buyers is greater than the decrease in sellers or vice versa. For sure, there will be a decrease in transaction volume. Longer term, it is unclear how big the 'rebound" in home sales might be, and until we know about when that is, it will be hard to predict. It is probably a good working assumption that a fair amount of activity will be lost. Whether that is 10% or 50% it is just too soon to tell. For good news updates on COVID 19, please check my running log here.