Even before COVID came along, the
local market was, well, interesting.
Technically a “seller’s market” or a “hot market”, buyers in the U.S. were
also doing well with low interest rates.
With such low rates, purchasing power increases, allowing buyers to
qualify for higher loan amounts (or to buy the same house for less money),
helping counteract the effects of higher pricing that a seller’s market
typically leads to. There was something for everyone.
And then along came COVID and it wreaked
havoc with the mechanics of buying and selling real estate as well as with the sentiment
of the buyers and sellers. So, even
though we are ostensibly in the same place – a seller’s market with very low rates
– the market is completely different because of changes in our view of the
world and how folks have quickly changed how things are done to accommodate a
world without contact.
As to the mechanics, real estate lending was affected greatly: banks tightened down on loan parameters, loan programs disappeared, there was more scrutiny of buyers by banks. Rates sank even lower. People were no longer able to transact business in the same way. Where once buyers could just show up to an open house, now there were no open houses. Viewing a home meant (and still means) reading and signing disclosures and caveats. Upon arrival, one is expected to be masked up, gloved up, sanitized. In some houses, only agents are supposed to touch anything, so if there was a door to look behind, the agent is the official door opener. (This was only to limit contact. It was not to insinuate that real estate agents are more hygienic than others). All of this makes viewing houses far less desirable. Offers were even written, house unseen, with the condition that once the offer was accepted and the other terms agreed upon, the buyers could take a look at what they were buying,
Outside of these mechanics of real
estate, sentiment changed overnight as everyone became suddenly more wary. Potential
buyers and sellers backed off, deciding to wait and see what was coming. Even the leviathans – Zillow comes to mind –
were spooked into removing huge amounts of money from existing transactions,
even walking away from deals in escrow, leaving sellers high and dry. When big companies do these things, it makes
everyone else pause.
The spring market, a time when
things usually start to happen and new inventory shows up on the market, was
handily slapped down by COVID.
But the market continues to move, if not as briskly. There are still people who must move for whatever reason and then there are those who are not scared of the market and continue with their plans (or have created new plans). No one can say with certainty what’s going to happen, though there will be long-term and unforeseen ramifications in addition to those short-term ones we’ve seen.
Today we’ve talked about some of the fundamentals that have already happened as a result of COVID. Next time, we’ll discuss some of the future implications of COVID – and how much COVID may end up permanently affecting long-term real estate markets.