✏️ Editor’s Note: Realtor Associations, agents, and MLS’ have started implementing changes related to the NAR’s $418 million settlement. While home-sellers will likely save thousands in commission, compliance and litigation risks have significantly increased for sellers throughout the nation. Learn how NAR’s settlement affects home sellers.
The World Health Organization (WHO) has declared the Coronavirus infection a pandemic. Officially known as COVID-19, a flu-like epidemic that started in Wuhan, China, its effect is now global. And the world is now in a state of turmoil and fear with over a billion people confined in their homes. The United States has emerged as a major hot spot, with almost 302,000 testing positive and 8,175 deaths, as of April 4, 2020, along with the hike in death till January 2023.
Almost all sectors of the economy are hit. And real estate is no exception. In this article we’ll look at the impact of the pandemic on real estate, and try to answer some questions our users have asked us in the past couple of weeks.
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Coronavirus: A Quick Overview
The novel Coronavirus impacts the respiratory system. Symptoms include fever, cough, and difficulty in breathing. Health experts have concluded that the virus spreads between people who are in close physical contact
(within about 6 feet). Another possible reason the person can get COVID-19 infection is by touching a contaminated surface or object, and then touching their mouth, nose, or eyes. The virus can infect an individual via respiratory droplets that come from an infected person who sneezes or coughs.
The virus has already claimed more than 64,000 lives worldwide as of April 4, 2020 and is exponentially increasing. Across the world, the impact is devastating on the global economy. If you’ve heard the news, stocks have already plummeted, unemployment is increasing, and the number of businesses is now in bankruptcy. COVID-19 is significantly affecting several real estate companies as it spreads.
In response to the COVID-19 pandemic, the National Association of Realtors (NAR) has made guides and precautions and a Sample Preparedness Plan for realtor’s associations to accommodate clients and employees. Here is a compiled information on the real estate market’s condition to make an informed decision.
Current Condition of the Real Estate Market
People conduct real estate transactions, including open houses, closings, and showings, in person. Due to the threat of the virus, most of the states are now implementing extreme procedures to contain COVID-19. Several state officials have issued “Stay at Home” directives and commanded most businesses to work from their homes, real estate agents included. Restrictions are in place for most real estate transactions that require in-person contact.
Due to coronavirus, states like California and New York have now banned in-person real estate business outside, i.e. showings. However, the states of Ohio, Wisconsin, Indiana, Hawaii, and Connecticut listed real estate as an essential business and therefore continues to operate. While other states are still indecisive of the next procedure.
In response to the outbreak, authorities have now implemented travel restrictions and are conducting quarantine procedures. Several real estate transactions are now delayed or slowed down as a result. 31% drop in sales was reported in New York from 2018 to 2019.
COVID-19 Government Responses
Around the world, governments are taking significant relief measures to help the real estate sector. In the U.S., Congress has made a special financial package to assist construction workers. Although building and construction are labeled as a “non-essential service”, the government still chose to offer a hand. While in Canada, the government has provided $27 billion and safety guidelines for direct support to Canadian workers and laborers. Ontario, for instance, was included in the “essential services list”—and was, therefore, given proper aid, the same with countries like UAE, Germany, and France.
In these times of global upheaval and crisis, the government across the world has provided special funding or welfare package.
Impact of COVID-19 to Home Buyers and Sellers
According to Glenn S. Philips, CEO and lead economic analyst for Lake Homes Realty, “The housing market in each state we operate has clearly been impacted by COVID-19. However, we believe the impact to date is negligible compared to the upcoming months.” This means that the numbers will still drop dramatically due to the fear of contamination from the prospects, brokers and even from the homeowners that may potentially be virus carriers.
The National Association of REALTORS® (NAR) reported that there’s been a decline in buyer’s interest as strict preventive measures and guidelines were implemented. By March 16, almost half of agents reported that some buyers are now hesitant to purchase properties—fearing the pandemic’s threat.
Homebuyers are also wary of listed properties that sit on the market for a long time. Whether it’s just the bad economy or price, most buyers tend to make negative assumptions.
What’s more, the supply lines that mostly come from China have been interrupted and in on-hold. In other words, there would be several delays in homebuilding. Moreover, can lead to the scarcity of resources or supplies.
Amidst the unprecedented impact, there’s still a positive note to consider. Currently, the market competition is perfect for home buyers. The mortgage rate marks the lowest level and more people could purchase an affordable home. Most sellers are still at the fear of the pandemic threat. As the outbreak deepens, a lot of opportunities are available and could still help save economic growth.
How Agents are Handling the COVID-19 Crisis
The NAR® has issued a preparedness plan to minimize the risk relating to COVID-19. Most of the staff are currently working from home and shall wait for further notice. The association has also made plans in addressing reports of the virus and provided a Guide for Realtors and the Unemployment Assistance CARES Act FAQs.
Preventive measures that help protect agents and clients from the spread of the virus
- Wash your hands regularly and thoroughly with soap and water (for 20 seconds duration). You can also use an alcohol-based hand sanitizer to eradicate the virus.
- Never touch or rub your eyes, and even your nose and mouth if you still haven’t washed your hands yet.
- Stay out of crowded places, group gatherings, and always practice social distancing (approximately 6 feet away).
- Remember to cover your mouth and nose when you want to sneeze or cough.
- Don’t travel or go out when you feel sick. Stay at home if ever you have a fever, cough, shortness of breath, or flu-like symptoms.
- Avoid physical contact with people who are sick.
If you want more updates and information about the National Association of REALTORS® in response to coronavirus for the real estate market, you can check the details here.
How American Home Sellers & Buyers are Responding to the Pandemic
Despite the threat of this global pandemic, there are still people who are looking to purchase a home. Homebuyers, mostly, utilize virtual tools and showings. Sellers too are still looking for homes online. The typical transactions are now done on the web, from online forms to showings.
“There are still sales. People will always need to find people always needing to sell. They could get job transfers, getting into a new school year. It’s always going to be buyers and sellers having to do”
Arizona Realtor Association President Mary Roberts claimed.
Each day, the impact of coronavirus to real estate will change how home buying works. But since the average contract interest rate for 30-year fixed-rate mortgages are now decreasing, people are now rushing to refinance. If you’re a homeowner, you might opt to consider refinancing while the rates are still low.
Fortunately, there’s an online portal that could list your home for an ultra-cheap price. Houzeo, for example, is a startup company that specializes in For Sale By Owner and Flat Fee MLS Service. The company’s goal is to bring the real estate process to your fingertips, making most transactions digital wherever possible. The overall process is simple and straightforward, from basic Flat Fee MLS listing to Full-Service listing.
The Future of the Real Estate Market
Although real estate continues to change hands across all states, the effect of the coronavirus and the stay-at-home order is clearly massive. Since most of the agencies and government offices are in shutdown, realtors, home inspectors, and sellers are struggling to complete transactions. The spring sales season, however, will not completely come to a halt. Some sellers will try to temporarily pull off their homes, while others still list their homes via full service brokers or a Flat Fee MLS service.
But once the cases drop (and the travel restrictions) and stay-at-home orders are lifted, almost every business will slowly creep back to normal. Several retail and sectors will soon be gearing up. There will be a flock of sellers and buyers again ready to compete in the market. Looking forward, realtors are now tested on how quickly they can recover with their resources after the pandemic.
As of now, it’s important to follow procedures and minimize physical contact. Real estate leaders should prioritize the health and safety of its people first. Remote work must be implemented to complete the usual real estate market transactions. And hopefully, pharmaceutical and biologics companies across the world can find and develop a vaccine for COVID-19.
To the different financial and real estate markets, it’s now a challenge on how to adapt and respond to global pressure and the threat of coronavirus. Since time immemorial, the epidemic is nothing new to mankind. During the year 2003, a severe acute respiratory syndrome or SARS had also made a large impact on the economy. Same as today, mortgage interest rates also hit relative lows. But despite business shutdowns and temporary on-hold transactions, people still find innovative ways to continue operating. Though the real estate industry is currently facing constraints, the market will eventually bounce back—sooner or later—in the next few months after the mandated shelter-in-place orders are lifted.
In the meantime, here are some answers to some frequently asked questions we’ve heard in the past few weeks.
Frequently Asked Questions
How can Coronavirus impact real estate?
Very significantly. In areas where real estate hasn't been deemed an essential business, transactions could come to a grinding halt. Evictions have been suspended, but so have mortgage payments. Still, many landlords may declare bankruptcy if tenants default on their rent payments. Will this result in lower prices? Who knows at this point.
Should I list my home for sale now or wait till after the pandemic is over?
Depends. If you need to list your home for sale, list it. If you prefer to wait it out till the buyers are back in droves, wait. No one really knows the answer to this question, and whoever tells you otherwise is speculating.
If I list now, what is the upside?
Upsides: 1) Your home will appraise at the current values. Appraisers usually look at the last 30-90 days worth of transactions, so if prices were to fall, they won't be reflected in appraisals for another 1-3 months. 2) With many other sellers opting to keep their homes off-market, your home has much less competition. 3) Many MLS' intend to remove the "Days on Market" metric so that listings active during this period don't get tagged as stale, that limits your downside if the home stays on the market longer. 4) If you are able to get out of your home and the prices go down, you would've timed your exit well.
If I list now, what is the downside?
Downsides: 1) First & foremost, you'll obviously have to ensure you take all precautions to prevent anyone from contracting COVID-19 during your home sale process. Read our blog to see what recommended steps are. 2) There may not be enough buyers and your home may stay on the market for a while. If your Realtor Association and MLS don't count the Days on Market during this period, then this may not be much of a downside for you.
If I don't list my property for sale now, what's the upside?
Upsides: 1) It's possible the pandemic will go away in a few months. The market might come roaring back and buyers ready to jump in to buy homes. Note that it's unlikely that buyers won't be impacted. With just the current unemployment numbers, home buyer affordability would've taken a hit.
If I don't list now, what's the downside?
Downsides: 1) Some estimates have unemployment rising to as high as 20%, if the government isn't able to control this pandemic. That'll surely rattle the economy and likely result in home prices falling like a rock. Your home may lose a lot of value if you want to sell later. On the flip side, if you were to buy a house, that next house would also be cheaper. 2) Appraisals too would've caught up with the lower home prices if the prices were to decline steadily.
What are the most important actions for home sellers who want to list now?
Two words: Safety and Virtual! 1) Ensure your property pictures are terrific. Get a professional photographer to take them if possible. 2) Get a virtual tour made. Your photographer can do a video tour, or you can convert the photos into a video collage. Preferably the former. 3) Mention in the property description that you'll be happy to provide a virtual showing of the property. This could be via a Zoom meeting, Skype, Google Hangouts, or any other video app. 4) Follow some of the tips here for virtual showings. If an agent can do it, you can do it. 5) Be ready to learn and adapt. If the prices start falling, drop your price quickly so you can sell relatively higher, and buy when the market is lower. Ensure you offer a competitive Buyer Agent Commission, so agents aren't discouraged from directing their buyers to you. Modify your property description as needed as the situation evolves - if you've disinfected the house, mention that. If there are gloves, etc. available, mention that. Watch this video to see how to request a change to your MLS listing.
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