In the last few weeks, as we have been talking with clients a major theme of questions has been directed towards us.
“How are you doing? What is going to happen to the market? How do you work during a pandemic?"
We thought it would be helpful to everyone to provide a general account of how Home Sweet RVA and the Real Estate Community as a whole is adapting to this change. As well as, give a look into what we think could happen and how social isolation will change the face of Real Estate for the future.
First, let’s go over the state of the market and what has been going on. If we look at the statistics on homes listed, median days on market, months of inventory, and the number of sales per month this year looks to be very similar to the last few years. We see slightly higher price points, slightly fewer days on market, and very low inventory. Basically, if you have read any Realtor’s Blog in the last 2 years you have read this synopsis. From this point on, if you hear anyone say blindly, “Now is a great time to buy or sell” promptly ignore them. They are idiots and will lose you a lot of money. For certain groups, yes it is a good time, but for others, it is not an easy answer. When you talk to agents, clients who are actively looking, and mortgage lenders there is an ominous feeling around the industry. People are trying to close out loans and get to closing as quickly as possible. Clients are holding off on selling their homes out of fear of having people come through their houses. It is simply not a happy-go-lucky time.
One should approach this market with caution. We looked great two weeks ago, we looked okay last week, and we haven’t figured out this week. It really is day-by-day, sometimes hour-by-hour in this market. We have seen most, if not all, properly priced homes go under contract, but we fear that will start to slow down. The days of 15 offers per home are over, for now, and we couldn’t be happier about it. The tide feels like it is slipping back towards a more neutral market. Two to four offers on a well-priced house may be the new normal.
As a buyer, it might be an easier time to purchase, and most of our first time home buyers are going full steam ahead on their searches. This makes sense to us, take advantage of a slightly slower market if you have the financial security to do so. A lot of cash buyers that have been beating out FHA or conventional loan products have completely evaporated. Buying with a loan is probably the easiest it has been in years. However your choices on what loan products are becoming fewer by the day. Financially speaking, a seller cannot assume any pre-qualification letter is good anymore. Job security is a big consideration, and a number of our sellers have asked what kind of jobs the buyers have. They take deep consideration in this, sometimes even taking a slightly lower-priced offer for more security.
Certain loan products are no longer offered. Just yesterday we had a 203K FHA loan, (A mortgage plus renovation loan) fall completely apart because the servicer’s investor simply stopped doing that sort of loan. We will see a large shift in the kinds of loans available to people. Buyer or seller, we must keep our clients up to date on these developments as they change literally day to day.
For Sellers, we can’t push the market the way we have in the last few years. We probably are not going to break any sales records this year. You can still get a good price for your home, but don’t expect people to be willing to give their firstborn to get your home. We are still in an inventory starved market and people are hungry to own a home. If you are getting ready to sell a home that would be a good home for a first-time buyer or even second-time buyer, this might still be a good time to put your house on the market. Additionally, we are also seeing high-end homes going very quickly, as well. If you are looking for a million-dollar-plus property, they are out there and going quickly.
Sadly our crystal ball is not as clear as we’d like it to be. As of yet, we do not know how much of an effect this will have on the overall economy, mortgages, or the buying power of our dollar. We can only be as thoughtful and smart as possible when buying. Our thought, if you buy, knowing full well you are going to stay in that house for 5 or more years, you are probably safe. Holding a home for 2 years and being able to sell it for a 50,000 dollar profit is dead and gone. Although we cannot foresee what will happen on the financial side of the Real Estate industry, we are willing to make some guesses on the mindset change we will see moving forward.
How will it change what people want to buy?
We really think this virus has changed people’s views in two fundamental ways.
The first way is financial risk avoidance. Unemployment hit an all-time high. If that doesn’t make you think for a second that your job or your income security, then I don’t know what will. Financial stability is a new thing in home buying and it could really affect people overbuying or over-leveraging themselves. Suddenly a 4 bedroom 3 bath house that costs $600,000 doesn’t look as good as the same size house that is at the $400,000 price point. Any sort of jumbo loans are going to take a massive hit rate-wise and will probably cause a slowdown in higher-end homes.
Will it cause people to downsize for fear of losing jobs, or upsize because they have lost their minds?
The people who follow Dave Ramsey’s mindset will try to find the smallest cheapest homes to own to avoid any risk.
The second way is forced isolation brought on by stay-at-home orders. This has introduced a number of items that have previously never been an issue with the vast majority of people. Working from home could very easily be commonplace for the next decade. Home offices will now become very desirable. Extra rooms in homes that had previously been a detriment while selling could now be a huge plus. Having a detached garage with an office above it could be the newest “it” thing.
With the closure of parks, yards might be a more desirable thing for people to be able to have a little outdoor space of their own. Because of this, I think there will be a sharp decrease in the appeal of condos within cities.
People will want to have their own space, away from others. I, for one, am going nuts stuck at my house, but at least I have a quarter-acre lot that I am able to enjoy and work in. Some people may want to go even further and we could see a big push for people who want to live in more suburban or more rural areas away from cities.
Additionally, we are going to see a lot of people, even if they do like their homes, decide it's time for a change of scenery when this is all over. Being forced to stay somewhere is not in our nature. We expect a massive influx of new buyers and sellers to enter the market once we are all allowed to continue normal everyday life. Whatever slowdown we see in Richmond will probably be a blip compared to how many people decide 5 years is enough in their current home and they need to upsize, downsize, or just get away from their crappy neighbor that plays terrible music all day while they “work”.
How are we working during this?
Well, at the end of the day, we have to still go out, see clients, and show houses. When someone makes the decision to buy or sell their house it is a massive change they are about to take on. So something like this virus, although life-changing, isn’t always a reason to stop what our clients have started. We are still seeing people listing properties, and those properties are still going under contract and closing. Although the timeframe has been pushed back and closings are slower, everything is still moving forward.
On a more practical level, we are seeing clients wanting to see fewer homes. They do a lot more online research about neighborhoods, do drive-bys and do their best to eliminate homes before going to see them. Before this pandemic, we were averaging a client seeing 10 homes before buying. Now it seems to be a lot less. We might see 5 instead, but the client has already eliminated the others based on external factors.
When we do go see a home, we ask if clients have had any symptoms. We instruct clients to allow us to open all doors, cabinets, drawers, etc. for them and observe social distance. Yes, it is a risk, but as an essential business, we have to continue to do our jobs. Obviously we carry hand sanitizer, use wipes to sanitize any surface we touch and try to remain six feet away from one another.
On the marketing side for listings, it means a number of things.
First, Professional photos and video tours are the new standards. People can no longer take bad photos and expect showings. We are seeing a rise in virtual reality and video walkthroughs. We do these for all of our listings, so it doesn’t change much for us, however, we hope that the rest of the industry finally catches up.
Second, open houses are no longer a thing. Our listing clients are fine with this, as we always tell people that an open house never sells your home, the marketing does. We will see fewer showings and fewer offers, but the quality of offers will be solid because they will be from serious buyers. This doesn’t mean the price you get will be lower, but that we won’t have 18 offers per listing anymore.
Third, at the end of the day, no one is going to buy a home without seeing it first, so we still have to show them houses regardless of the virtual tour, great photos, and video walkthrough. As the saying goes, change is inevitable. It is one of only a few constants in life, whether we like it or not. It’s up to us to be flexible, adaptable, and embrace the change so we can continue to grow and flourish