The natural expectation is that the market...that is the prices for real estate will go down because of the pandemic. Yet here we are 6 or 8 weeks in and prices have not gone down.
The current transactions are being appraised at current market values. We are not seeing prices drop, therefor, the current transactions are being appraised and comped against current that is pre pandemic prices.
To discuss prices...values, you have to talk in terms of supply and demand. Supply has not had much of a change. People, 3 months ago that planned on putting their houses on the market in the next 3 months may have done so. People that might sell now, don't want to move in a pandemic so...supply might be influenced lower.
Demand. Demand has been strong, at least in our suburban market North of Tampa and St. Pete/Clearwater. We have many buyers that want to escape the cities and move to less densely populated areas. Buying a $200,000 home in Florida, is a great escape for many of the buyers we have seen.
That is where we are today. Supply and demand matching each other at prices that are the same or near what they were pre pandemic.
The change that we can forecast is on the supply side. 30 million people losing their jobs. This will have a highly predictable impact on supply.
There are 2 variables. Renters and home owners. Tenants most likely paid their March payments...they were likely still working in February. March rent payments are due by May 5. Today is May 2. So, in the next week or so we will start to get an idea of how many tenants are unable to pay. An eviction freeze in my market will delay the impact on the market for these properties.
Therefor, land lord owned properties will not be flooding the market...not until the evictions are completed, in many cases the homes will be remodeled and eventually either resold or re rented. This supply will replace home owners that will not be selling because they don't want to move during a pandemic.
Homeowners. How many of the 30 million newly unemployed are home owners? Great questions...call me if you get the answer. 727-409-4663. Then you have to look at where they are and then forecast this number into future supply.
We don't know the numbers but we can do a time line.
Generally, if a home owner stops paying their mortgage, the lender will file a lis pendans around 90 days later. From there it can take 6- 9 months or more for the foreclosure to happen.
In the past, when some one is in pre foreclosure, there is an opportunity for investors to buy these pre foreclosures. I don't think there will be much of a pre foreclosure market this time around. These home owners have no where to go. They have no job and no money, so they are likely to stay in the home for as long as they can while they get back on their feet.
So the conclusion here is that supply....excess supply is 9 months away. It is highly predicable. The lis pendans filings are public records so we will see them. Summary foreclosure judgments include a foreclosure sale date, so these numbers and dates will be known in advance.
Once the foreclosure occurs, it will likely take the bank/lender a couple of months to get possession, clean the house out and put the house back on the market...so are we really 10-12 months from seeing a supply bulge?
In dealing with current home owners that are considering selling ... they are not considering substantial price reductions. Why would they. They want current market values. Or more. Sellers always think their property is better than the comps.
Therefor prices for real estate will not be crashing any time soon.