The Wethman Group's Real Estate News - April 2020

People have asked what the impact is on real estate, and if our team is still working. The impact depends on how long this goes on, and I’ll share more thoughts in our monthly public newsletter. Though market activity is down by 15% or so, that still leaves 85% of buyers and sellers pressing on, and so it goes with our team—we’re working where it makes sense to work, since people still need to buy and sell, even during a pandemic. We’re taking precautions, of course, and encouraging our clients to do the same. We’re actually still fairly busy, as people look for opportunities in the ‘pause’ to think through next steps. We hope that the slow down is just a ‘pause’ for us and business is deferred, rather than lost. And of course we’d like business will resume quickly once the danger has passed. In the meantime, this is a great time to do some planning for a purchase or sale down the road, and we’re scheduling consultations online and via phone, so we appreciate you thinking of us with your referrals!

Across the entire DC region, in a nutshell, inventory did about what we expected—March was slightly above February, but still down year over year. This continues our expected trend of low inventory year over year. What was interesting though, is that new pending contracts (that is, properties that went under contract) at end of March was down a whopping 15% from March 2019 (for reference, March 2019 was just 1.4% lower than March 2018) across the entire DC region. That drop in pendings is the largest year-over-year drop since April 2011! So across the region, sellers pressed forward in March, but deals were fewer, perhaps because sellers were overconfident, perhaps buyers are just more cautious, or some combination. See Katie being interviewed by NBC4 about how agents are adapting to this new world here.

 

Northern Virginia tells a similar, but perhaps more balanced story—inventory was down 12%, but pendings were down 16%, an indicator that both sellers and buyers both are changing plans and being cautious. In DC, March inventory was up 5.1%, but pendings were down 14.1%--which could be an indicator of more strength for buyers to negotiate during the current situation.

 

We can infer from this data that for the most part, people who were planning to list in March pressed ahead, but buyers pulled back more than sellers, resulting in fewer contracts. Anecdotal conversations with our photographers and stagers tells us that there were a lot of cancellations and/or a drop in business for them—those ‘leading indicators’, along with our own slow down in listing appointments, make us suspect that inventory in April and May—already expected to be lower than previous years—may be even worse than feared. Now that reality and social distancing have sunk in, it’s very possible that the spring wave of inventory from sellers won’t materialize. 

 

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. 

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. 

 

The National Association for Realtors has published this page with helpful resources for property owners, including a list of the banks (including Wells Fargo, Chase, Bank of America, Capital One, and US Bank) who have published guidance for those struggling to make mortgage payments in this time of uncertainty.  DC has taken the step of requiring mortgage companies to offer 90 day deferrals, but details are scarce at this time. Most utilities have indicated they will work with owners, and will not cut off service even if an account holder falls behind on payments, and many student loan payments have automatically been deferred for six months. Experts have warned that, in a rush to pass laws and get guidance out there, the rules and offers may have some unintended consequences; the lack of needing ‘proof’ of hardship may result in too many people opting for forbearance, which could lead to a mortgage lending liquidity crisis down the line. That could lead to a real issue in people’s ability to purchase in 6 or 12 months, as lenders may lack funding to make loans and tighten underwriting criteria as a result.  

 

Recent legislation has provided resources for many small business owners, including the self-employed and gig workers (who historically have been denied many of these types of programs like filing for unemployment). Time is of the essence in applying for some of these resources though, so do your homework quickly on programs like the SBA’s Paycheck Protection Program and the EIDL to get into the queue. Also be aware that quarterly estimated payments, as well as year-end 2019 payments, have been deferred through July 15, 2020 without penalty or interest, which should ease a cash-flow crunch for the self-employed and small business owners.

 

Certain supplies and even groceries can be a challenge to find, let alone have delivered. If you’re in need of something specific, contact us so we can share our list of sources for items like pantry staples, cleaning supplies, hand sanitizer, and (non-medical grade) masks. We’re here to help!

 

 

We're starting a new feature: Tips and tricks for all things related to home buying, selling, and owning! Need some advice on something specific? Just contact us!

 

Homeowners: Once restrictions start to lift, there will be a run on signing up with contractors to get projects done; start interviewing contractors now so that you're a priority for your chosen service provider once time allows.

 

Home Sellers: As the nation edges so carefully back to work, it's time to start evaluating your strategy if you intend to sell this year. Depending on the speed of restrictions being lifted, and the location, it may make sense to plan for an early Summer sale vs. a Fall sale. Think about the prospective buyers for your home and ask us to look at historical trends for your location.

 

Home Buyers: There are some big changes in Veterans' loans and also jumbo loans, with some big investors pulling back on their purchases of these types of mortgages. If you were previously preapproved for either of these products, it's a good time to reconnect with your lender to make sure you weren't impacted by the changes.

 

 

 

 

 

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