This was the Market Snapshot I was able to send out recently. I delayed my usual spring Market Snapshot this year, as I reported at the end of March, with the pandemic crisis in full flow. We have enough data now for a brief snapshot of the housing market.
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In general, home values have no reason to fall and economists expect continued appreciation. Housing market activity has been quarantined, but pent-up intentions are now being released into the marketplace. Housing economists expect some busy summer months, followed by a lull in fall and winter, with a renewed surge of activity in spring of 2021.
Lifestyles have been adapting to the new conditions, and this may shift the demographic trends a little, and certainly has added a few new procedures to real estate transactions.
Numbers
The usual numbers are not very helpful to define trends at present. Home prices, inventory levels, buyer intention and consumer confidence all show a favorable gain in Q1 compared with the previous year. But of course it will be the Q2 numbers that begin to show the extent of economic decline in this year from the pandemic.
Home prices haven’t shown any sign of going down, and this matches my own feeling that homeowners have no reason to drop their prices. A wave of foreclosures could change that, but only about 10% of mortgages have taken advantage of forbearance on payments so far, and we already know that at least two-thirds of those forbearances will move the deferred payments onto the end of the mortgage.
Price is determined by supply and demand, and homeowners have strengthened their equity position since 2008, with, as we’ve seen, a large majority prepared to stay in place rather than sell at a disadvantage. Meanwhile, buyers continue to surge.
It’s actually a good time to buy, with rates around 3.3% for a 30-year fixed mortgage – if you can get credit from lenders who are nervous about carrying the forbearances.
But between the Millennials straining at the leash for homeownership, apartment life seeming less attractive now in a time of epidemic, and investors ready to pounce on any distressed property, the scarcity of inventory for sale seems likely to continue. Home builders are optimistic, and new homes will continue to enter the market, but as always, never enough.
We have yet to see the economic damage from the public health emergency, and supply may be an area that will change over the next few months – of course I’ll keep you posted as more things become clear.
Protocols
Real estate procedures have been impacted by the pandemic of course. Obviously, online tools have surged in use. Virtual tours and professional photo shoots are becoming more standard now.
Showings are a lot trickier now – the seller hopes that potential buyers will wear PPE (masks, gloves, bootees, etc.), but none of this is enforceable, and showing appointments have become longer to allow for sanitizing the home after each visit.
The days of everyone piling into one vehicle to go look at property are over for now, and open houses may become a thing of the past, with every visit to a home needing to be scheduled. The increased hassle of showing and viewing a home may actually help restrict the process to only the determined prospects, leaving the online portals for those still in the category of “just looking”.
I-buying and selling seem poised to increase. People obviously like the online convenience, but how many people will actually pay the high premiums associated with online trading remains to be seen.
Real estate professionals who worked through April report that they were able to complete all procedures and bring deals to closing, still maintaining social distance, with few problems. Many sellers pulled their listings during the crisis, but buyers continued to show strong interest, which was good for those listings that stayed on the market. Now that the season is beginning in earnest, we’ll see if inventory will increase.
The housing market season has started late this year of course, and it looks like it’s beginning to surge already. Analysts expect activity well into September this year, rather than the typical drop-off after August.
Future
It remains to be seen how many kids will become permanently home-schooled, and how many workers will permanently work from home. We have yet to see how the short-term rental and accommodation markets will recover, and how the travel, catering and other service industries will fare.
Before the pandemic, the great majority of surveyed homeowners reported that they expected our overheated economy to experience a correction, but that this would not affect the housing market. Well, here’s the mother of all corrections, and we shall see how well this most stable of all markets can weather the storm. I’m reasonably optimistic.
