What is COVID-19 Doing to Real Estate

In March I wrote an article about how the Coronavirus had hit the stock market, and how that might affect real estate. Well now we’re more than a week into April and we don’t have to ask what might happen, because it’s happening right now.

As a Realtor, I have a bit of a different perspective than, say, a journalist or economics professor would. If I’m doing my job right (and I am) I spend my days talking to people, lots of people. I talk to them about their dreams, plans, timelines, and hurdles as they get closer to being ready to buy or sell a home.

Many of these people I’ve been talking to on and off for months or even years. We usually talk about what they wanted to do with their house first before they put it up for sale, or how they want to wait until school’s out to buy a new house. Nowadays the only thing we talk about is The Coronavirus. People have lost their jobs, their businesses have closed, and they have no idea what’s next. The virus is scary, but the economic halt has hit people like a freight train. Needless to say, real estate has fallen to the bottom of the priority list for many people.

So, I don’t have to wait for next month’s real estate reports to know what they’re going to say. The market has changed, and real estate is taking a BIG HIT.

There are three things hurting the real estate market right now. One of them is temporary, but the other two could last a bit longer.

  1. It is physically and logistically difficult to conduct real estate transaction right now.
  2. Sellers and Buyers are anxious about the future and about their health. They are scared.
  3. A LOT of people have lost their livelihoods.

But there is some good news. At the end of this post we’ll talk about the silver lining in all of this, which is: It is objectively a great time to be a buyer of real estate.

So, let’s go over each one of these in a little more detail.

It Is Difficult to Conduct Real Estate Transactions

The main reason it’s difficult to conduct real estate transactions is because of the shelter in place order. Currently, homes can still either be shown virtually, or seen in person only if the home is vacant. This means that buyers are limited to only viewing homes in person if the seller does not live in the home. So, the seller living there and “stepping out” while you view it would not be considered vacant.

You also have the option of making your offer “Contingent upon inspection,” meaning you get to go see the home after you’re opened escrow. Then, you decide if you would like to continue the escrow or not.

Viewings aren’t the only thing that has made transactions difficult. It’s also inspections, appraisals, and delays at title and lending companies, due to vendors being closed or people being out sick. If you open escrow in this climate, just be prepared for it to last a while longer than it typically would. Transactions are being held up for weeks because we can’t get a contractor or site inspector out to a property.

Of course, most of these inconveniences will fade once the shelter in place order is lifted and we return to some amount of normalcy.

Sellers and Buyers are Scared

Buyers and Sellers are scared, and how society feels has a real effect on the market. Mayor Cuomo of New York, which is the epicenter of the Coronavirus Pandemic, said something to this affect. He said he doesn’t believe we will go back to normal. We’ll get to a new normal, but we’ll never get back to the normal of yesterday.

In the context of real estate, it’s not necessarily the virus that people are scared of, but the effect that it’s had on their communities and local economies. If a buyer decides they don’t want to buy a house anymore because they are worried about a recession, that fear doesn’t just go away because the virus went away. That fear will linger. If a seller decides not to sell because prices have come down, it could be a long time before prices come back or they come to terms with the new market.

When you add up all the anxiety of the buyer and sellers in the market, it ultimately leads to a cooling off in the real estate market.

People Have Lost Their Livelihood

Of course, we are not all in the same boat, some industries have been relatively unaffected or even benefited from the pandemic. People in the public sector are for the most part still working, or at least getting paid. However, many parts of the private sector are suffering.

Social distancing has hurt many businesses, particularly local small businesses that rely on customers to physically visit their brick and mortar location. Restaurants, Bars, Cafes, Shops, specialty stores and others have all seen their patronage disappear.

Massive numbers of people have been laid off as a direct result of the Coronavirus pandemic and social distancing orders. The damage has been done and will undoubtedly have a long-lasting effect. People who were looking for a new home just a month or two ago, are now looking for a new job while their bills eat through the down payment they had saved up. This kind of thing can take several months, if not years, to recover from.

Good News for Buyers

It’s not all doom and gloom, there is some silver lining in all of this. It is now a great time to be a buyer!

Buyers Finally Have Some Leverage

We have been in a strong seller’s market for years that was fueled by low housing inventory. However, due to the current pain in the real estate market, qualified and willing buyers are actually in short supply.

In the past several years, buyers have almost always found themselves in multiple offer situations when attempting to buy a house. However, right now the tables appear to be turned. If you were to look for a house to buy this month, you would have almost no competition. So, for the first time in years, buyers have found themselves in a strong negotiating position.

Money is Dirt Cheap!

Interest rates are lower than they have ever been. This should be music to your ears if you are a real estate buyer that plans to get a mortgage. Borrowing money today will cost much less than it would have if you borrowed money at any other time in history.


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