I get asked almost on a daily basis “What do you think is going to happen to the market?”
Answer: I am not entirely sure and any Agent or entity that tells you otherwise is completely guessing. This is a pandemic, something no Realtor in the industry has ever experienced.
Here are 3 quick opinions:
1) This is not 2008, so lets stop comparing it. No doubt we have already been impacted by COVID-19 with the shelter in place orders and business forced to close. However, the underlying issues in 2008 vs. pandemic variables are significantly different. I do not anticipate 20% decreases in housing prices. I expect the economy will recover much more quickly and the housing market will remain somewhat stable in terms of values. In fact in the 3 recessions prior to 2008 the housing market continued to gain value.
2) The changes we are making in the industry to adjust for COVID are likely to be around for a while – limiting groups in homes, cleanliness, pre-screening, tightening of lending.
3) People are still wanting to buy and sell homes during the pandemic, lock down, and likely into the future. Uncertainty in employment, wavering interest rates and inventory levels are big considerations. At the moment we still have historically low interest rates and we all will always need a home.
It is crazy how we all soon forget how the market was performing pre-COVID. Here are some stats pulled from National Association of Realtors (NAR) and Minneapolis Area Association of Realtors (MAAR):
In February, the United States experienced:
1) +7.2% in sales of existing homes to last year
2) +8% in median sales price to last year
3) -15.3% in inventory of homes for sale
In February, the State of MN experienced:
1) +6.0% in closed sales to last year
2) +6.3% in median sales price of homes to last year
3) -12.4% in inventory of homes for sale
Needless to say, February was continuing a very strong real estate market across MN and throughout the Country as prices were rising as a result of rising demand (lower interest rates, Spring market, etc.) combined with lack of inventory levels. I often joke that Realtors would all be millionaires if there were enough homes for people to buy.
Enter March 2020 and COVID…
I truthfully believe we have not seen the true impact of COVID yet, real estate is a market that trends up or down typically don’t show in the stats for 2-3 months as a typical transaction is 45-60 days from accepted offer to closing. When we will start to see the impacts in the stats will be with May’s numbers. Realtor to realtor we feel like we are in December right now, not the heat of the spring market. What happens in December? Properties sell, just at a much slower pace. Far less inventory available to see and less buyers actively looking. That is what COVID has done, as stated before everyone needs a home and people need to move – so property transactions will continue, just at a slower pace until we know where the light at the end of the tunnel is. After that, assuming that the stimulus package(s) work, and the folks have jobs to go back to I predict we go into a serious “spring” market – pent up demand and more available inventory. Our “spring” market this year may start in the fall.
As you look through the MAAR stats for the Twin Cities, you still find some strength overall and an even tighter squeeze on inventory:
1) +6.3% in closed sales to last year
2) +9.1% in median sales price of homes to last year
3) -20% in inventory of homes for sale
Here are some interesting stats regarding showing activity over the last 30 days. It’s hard to make a ton of inferences straight from this data because you would want to compare it to inventory, but I still find it interesting:
1) 83% of showings are happening <$400k, 60% < $300k
2) Homes >$700k account for <2% of showings, likely less listings and Buyers in this range too, though
3) The date of 3/19 is when showings this year started to decrease compared to last year. There is currently a gap of about 40% from last year, so showings have declined significantly. This is compared to +60% to last year prior to COVID!!
The main message I want everyone to understand is that this is a once-in-a-lifetime event that no one has experienced. The Government is executing stimulus bills, companies are shifting production to attack COVID, people are balancing isolation, parents are teaching their own kids, there is fear in the community, among many other things. With that being said, the Associations of Realtors is doing a wonderful job adapting to a new world in the midst of COVID:
1) More virtual tours/videos/3D walk throughs
2) Utilizing gloves and masks
3) No overlapping showings
4) Riding separately from clients
5) Sellers leaving lights on to avoid contact points inside homes
6) Pre-screening buyers for seriousness levels
Thank you for listening everyone. I am excited for Q3 and Q4 and I think all of you should be too. We will learn a lot as the economy repairs!
Joe Maselter