What Does This Mean for Our Real Estate Market Long Term?
First, a reminder: A ‘balanced market’, in terms of buyer versus seller negotiating leverage, is 6 months worth of inventory (or, aka, 6 sellers: 1 buyer). The DC market generally runs at <2 months of inventory, and sometimes < 1 in the Spring busy season, depending on location and price range. So in other words, we have been in such an extreme sellers’ market for so long that we would need a hugely significant shift to approach even a ‘balanced’ market in the DC area. Right now, we’ve seen yet another drop in inventory as the uncertainty caused a lot of sellers to put their moving plans on hold—no one wants to declutter and keep the house clean when they’re sheltering in place/working from home/ home-schooling, and also trying to avoid having strangers come through your home when it’s on the market.
Nonetheless, we’re seeing some pockets of opportunity, especially on vacant homes, for buyers who have been sidelined in the past year – number of showings is down and number of offers is down, so where you may have been competing before, you may have a better chance now.
We also need to look to the job market and income level stability
of those likely to purchase—if homeowners (and home buyers) have steady jobs and stable income, they’re still going to look to buy, especially if interest rates remain low—more on that below. The metro DC area is ranked at very low risk for losing jobs
. Obviously job losses and pay cuts are more significant in the hourly arena, who typically would not make up the bulk of buyers in our area. Renters may be in for a pleasant surprise, as landlords, eager for cash, may keep rents steady or even decrease depending on the length of the crisis.
Some buyers are hopeful for a surge in distressed sales and foreclosures, but, as we saw, banks moved quickly—perhaps too quickly—to provide forbearance options even with no proof of actual hardship. We can argue the wisdom of that decision, but one thing is clear: banks learned from the last decade’s crisis that they have no interest in obtaining a balance sheet full of foreclosed properties.
I still need to buy or sell…what do I do?
Coronavirus or not, some people are still on a timeline to buy or sell this year. Here’s what you should be doing now to prepare:
Buyers: Go ahead and get started with a loan pre-approval and discussing your criteria with us. For some people, this represents a unique window of time for buyers where you may have more opportunities; we can leverage historical research and virtual technologies to ‘see’ homes and then, if we can take proper precautions then there’s no reason we can’t go in person—our team can provide masks, gloves, and hand sanitizer. Or, if you’re not comfortable going in person, we can do videos or even live Zoom/Facebook Live/FaceTime/Skype walk throughs with you. The rest of the process is easily managed via digital signature and teleconferences. We even work with home inspectors who can bring you in ‘virtually’ and title companies who can do e-closings!
Sellers: Let’s discuss the timing and process that will work for you. We can discuss proper precautions to allow in person showings, but we have a wide variety of virtual tools like 3D tours, videos, virtual ‘live’ open houses and other tools to minimize in person risk while still maximizing marketing exposure. Or, if we decide later in the year is better timing for you, then this is a perfect time to begin decluttering and reorganizing the house to get it ready—we can do a virtual meeting to ‘look around’ and offer suggestions.
Interest rates are a bit of a wildcard, having been through an extremely volatile few weeks. While there’s no doubt that regulators and the government would do everything possible to keep rates low, and people spending money, if we get into a liquidity crisis then it could become a lot harder to get a loan. The Fed and others have indicated they will loan any amount though, so everyone is quite aware of the impact if lending slows down. Nonetheless, we’ve already seen the jumbo market hit as Wells Fargo made a big exit as a purchaser.