What will Covid-19 do to the real estate market? That’s a really good question. Let’s take a look at where we were, where we area and were we are going in the Portland and SW Washington real estate market.
Where we were:
- RMLS Market Action reported 1.9 months of inventory in February: a strong seller’s market. Conventional wisdom says that historically six months is a balanced market between buyers and sellers. I personally think that four months is more realistic.
- Multiple offer situations were the norm for homes priced under $600,000 if they were appropriately priced. Buyers were often frustrated by having what seemed like a crazy-good offer get beat. An overpriced house is overpriced in any market and is likely to sit (and eventually sell for less than it would have).
- Interest rates fell and then went up (though still WAY better than this time last year (4.41%). Buying power is increasing. https://ycharts.com/indicators/30_year_mortgage_rate
- The Dow Jones Industrial was flirting with 30,000 (closed at 21,237 today).
Where are we now?
- The Dow first hit 20,000 on January 21, 2017. It dipped below that last week having been flirting with 30,000 just weeks before. If your down payment was coming from cashing out stocks, this is major. If not your future stock based nest egg clearly took a hit but the loss is only realized if you cash out.
- The Fed cut short term interest rates to zero. What does this mean to mortgage interest rates? Nothing. Mortgage rates a correlated but not tied to Ten Year Treasury notes. That said, mortgage interest rates hit historic lows and then came back up.
- Real estate is still happening though in a heavily modified manner: NWMLS (Seattle area) has banned open houses. In Oregon and SW Washington (served by RMLS) we are still left to our own discretion but extra precautions are the norm (sanitizer, wiping down surfaces, keeping parties separated). Reports showed strong participation at open houses last weekend though many were canceled.
- Showings and listing appointments are still happening with the same considerations above. More are being done virtually though FaceTime and other online methods.
- Loan funding, escrow signings and title recordings are still happening.
Where are we going?
- Buyers will rely now and in the near future, more than ever, on strong visual representations of home including 3D Tours (which we do for all of our listing anyways) and professional photos. Here’s a sample of a 3D tour for our 310 NW Maywood Dr. listing.
- We launched two new listings in the last 24 hours.
- Buyers are at home, watching HDTV and looking for their dream home on Zillow.
- Some buyers will step back from their home search. Whether by choice or circumstances.
- Some buyers will relish the current market and take advantage of interest rates and some reduced competition.
- Sellers usually don’t wake up one morning and decide to sell, it’s part of a planing cycle. Now, sitting at home, that plan may developing more. Staying at home gives one a chance to pack up the clutter, touch up some paint, or sit on the sofa and watch HGTV while searching for their dream home on Zillow. Again, listing appointments and new listings are still happening.
What we can’t predict:
- This time next year, an old white guy (or potentially their VP) will be president. Will it be your old white guy? How will said white guy’s policy impact the economy?
- How long will it take to get Covid-19 under control? Is it worse than it looks because we are not testing enough or is it better than it looks because we are paying attention? Will two+ weeks of social isolation work? The last economic crash was caused by the real estate market. This one may be saved by the real estate market.
- How long will it take for economically impacted buyers to re-enter the market? Just as the “summer selling season” starts?
- Will a few “quality” weeks at home with family convince people that their home is too big, too small or just right? Are they going to remodel it or go out and find what they want already done? When are they going to do it?
- When I turn the news on this evening, will everything above be wrong?