The bad news is that the pandemic has radically reshaped the real estate market, especially regarding the ways that homes are bought and sold. But the good news is that buyers, sellers, and resourceful agents have already found ways to adapt to the “new normal,” and that the market is showing signs of fundamental strength— suggesting that the downturn in home prices many feared may not be in the cards.
Let’s start with the biggest problem. In-person open houses were banned in nearly every state at the start of the pandemic which, for an industry so reliant on handshakes, networking, and face-to-face interaction, was a devastating development.
Sellers pulled their listings en masse, and buyers fled the market— some because they’d been financially hurt by the pandemic, some because they couldn’t imagine buying a home they couldn’t assess in person, and others because they were anticipating an imminent drop in prices. Predictably, sales volume in April saw the biggest month-to-month drop recorded (-22.5%) since the dark days of 2010.
But the anticipated drop in prices didn’t happen, at least not yet. The median price for existing U.S. homes in April was up 7.4% compared to the previous year, according to the National Association of Realtors (NAR), with price gains in every region of the country. And with the arrival of summer — and, in many states, relaxation of lockdown measures — buyers and sellers have slowly begun returning to the market. But the market they’ve returned to isn’t like the market they left in March.
Private Showings Have Replaced Open Houses
Many states are holding open houses again— sort of. When Michigan partially reopened in early May, mass open houses were still banned, but private showings of four people or less were allowed. The same happened in Las Vegas, where pairs of agents now conduct pre-scheduled, private showings for up to two buyers from the same household. (Those agents, incidentally, believe this will be the norm until there’s a vaccine.)
In states that have allowed open houses, a lot of them have been restricted to only two hours, to cut down on traffic. It’s safe to assume that these open houses will have caps on capacity, and may ask buyers to observe social distancing measures.
Obviously, these changes are going to cut down on how many eyeballs you can get into a house on a typical Sunday. And keep in mind that surfaces will have to be sanitized between visits, which means showings can’t be scheduled back-to-back. For all but the most desirable properties, the sale timeline is going to be stretched out quite a bit, and bidding wars may become far rarer.
Luxury May Be the New Standard
Other agents point out that for homes worth more than $5 million, agents have, for years now, been doing remote showings, before scheduling private in-person showings for serious buyers. That model is likely going to be the norm for all properties now.
The good news is that there’s already an existing template for this kind of sale. The easiest way to do a remote showing is to use a smartphone and apps like Facetime or Zoom to “show” buyers around a property. For more advanced agents, services like Matterport can create an extensive 3D showing of your property; these services can be pricey, starting at $69 per month, but the product is impressive.
There are even options for homes that need a little polish before hitting the market. Virtual home staging has emerged as a great option to give your home’s presentation a little bump, without having a professional stager, not to mention movers, decorators, and other consultants come into your home. Virtual staging services use software to adjust the furnishings and lighting of a home; think of it as a combination Facetune/Photoshop for houses.
Closing Is Complicated — But Not Impossible
In many states, closing is required by law to take place in person. But the industry has adapted here, too. In some states, buyers and sellers have met in parking lots and signed the documents in their respective cars. In other places, agents have delivered the closing papers to the seller’s home, and waited at a distance while they signed. Other closings have taken place in the open air, across oversized picnic tables. The point is that the industry is adapting, and sales are still going through.
The Market Is Holding Up
Even though much of the economy has gone wobbly, the housing market has remained strong. Home prices haven’t taken the dip many experts predicted, probably because demand has remained high while supply is constricted. In fact, Redfin reports that 41% of new listings have been subject to a bidding war, which suggests that there are still a lot of buyers out there who are actively looking.
So, will home prices crash, or are we past the worst of it? No one knows for sure, of course, but the 2008 recession saw home prices tank because the real estate market was the cause of the entire crash. This has caused many experts to forget that, in past recessions, home prices have actually gone up or held steady.
Housing is a necessary good, and there are always people who need to buy a home. That means 2008 was the exception, not the rule. That doesn’t mean we should let our guards down. But if history is any guide, the housing market has a good chance of getting through this without feeling too much pain.
Dr. Francesca Ortegren, Ph.D. is a Research Associate at Clever Real Estate where she focuses on helping people understand complex data, real estate, finances, business, and the economy by researching various topics, analyzing data, and reporting useful insights for general consumption.
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