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COVID-19 & Real Estate

Summary:

Many facets of life are affected at the moment - real estate included.  There's not much news about real estate specifically.  Here's a quick run through of what's happening locally:
  • Real estate is still functioning.
    • Showing activity is now (with the state order) dramatically reduced, and will remain so for some time (at least through April 13, 2020).  Only Buyers needing to move quickly who have demonstrated financial ability will be shown.  Only listings that can be safely presented will be shown.
    • Buyers are making offers (1510 properties went under contract according to FMLS between March 23, 2020 and March 30, 2020 )
    • Sellers are accepting offers 
    • Lenders are funding / issuing mortgages (774 properties closed in the last 7 days [March 30, 2020])
    • Closing attorneys are settling and recording deals
    • Roughly the same number of properties are coming on the market as a year ago.  Those going under contract in the last 10 days are about 50% of the 2019 volume.
  • In many cases showings have shifted to virtual showings or more limited showings, but things are moving forward - though at a lower volume
  • Prices are stable, and are expected to remain this way.
  • Things are changing daily.  There's a lot of detail and reference material below.  Please bookmark this page and check back for updates.

Detail:

The world is changing on a daily basis as COVID-19 makes its way around the globe.  Americans expect freedom, available healthcare, and security.  All of these expectations have been challenged by the speed and efficacy of COVID-19.  Much of the news covers infection numbers, deaths, hospital preparedness, and availability of food and groceries.  Very little coverage exists for broader economic implications, how the markets will re-emerge, or real estate specifically.  This will be our focus here.  

No one has a crystal ball that shows how all of this will unfold - us included.  We will endeavor to share as much factual information as we can, along with how we think it will play into the real estate market, and the economy as it re-emerges.  We will also work to address what is happening specifically with real estate as the market adapts.

Real Estate is in many cases considered an 'essential service'

Please note that there are numerous levels of government in play at the moment, and you should check the local rules for the property in question. Many label real estate as an essential service.  People are relocating for jobs, leases are ending, purchases are still being completed, and properties are still being built.  These require people to have the ability to buy, sell, lease, and move.

As an example, you can view the stay at home order and the business category documents for City of Decatur here.

Real estate is also viewed as essential as you review executive orders around appraisals, construction, the mortgage and financial markets, etc.

Current Showing Guidelines & Frequently Asked Questions

  • Are you still showing?  The short answer is yes, but it's a qualified yes.  If a person is in need of housing / making a move in the short term, we do continue to show.  If someone wants to purchase several months from now, and just has time on their hands with the stay at home orders, we are delaying those showings.  We are following social distancing protocols at all listings. Additionally, buyers need to be qualified by a lender prior to any physical showings, and listings to be seen need to be safely available for showings.
  • Should I still put my home on the market, or should I wait?  It can still be appropriate to list a property at this time.  In particular if the home is vacant.  A number of buyers are at home scouring websites for new homes on a daily basis.  Many are ready to go. Please call to discuss your situation.  Note - new cleaning provisions now need to be followed.
  • Are closings still happening?  Yes - closings are definitely still happening.  A number of adjustments to the normal process have been instituted to minimize personal interaction, but closing attorneys are still operating, banks are still funding, and closings continue to occur.
  • Is now a good time to buy?  “If one feels that their job is secure, and many jobs are…take advantage of the record-low mortgage rates” – Dr. Yun (Chief Economist for the National Association of Realtors)
  • Is there likely to be a significant price shift? 
    • Given the variables known at this time (March 26, 2020), there is NOT likely to be a significant shift in home values as a result of COVID-19. 
    • There are a number of variables that continue to evolve.  Many we will not know the answer to for some time. 
    • The quick explanation for price stability is inventory [longer answer here].  The number of months of inventory in the market is still very low relative to a balanced market. 
    • Zillow did a review of pandemic impact on house prices that you can view here.  A couple of their key findings:
      • "During epidemics such as the 1918 influenza or the 2003 SARS outbreaks, economic activity fell sharply during the epidemic (a 5-10% temporary hit to GDP or industrial production over the course of the epidemic) but snapped back quickly once the epidemic was over."
      • "This pattern differs from a standard recession, which is a situation in which economic activity falls for 6-18 months and then recovers more slowly."
      • "In the past 23 years, there have been two national recessions — the dot-com crash from March to November 2001 and the Great Recession from December 2007 to June 2009 — and several statewide or regional recessions. Home values broadly fell across the country during the Great Recession, but in most other cases annual home value growth remained positive."
      • "Recessions do have an impact on the housing market, but the widespread collapse of home values during the Great Recession is an outlier."
    • If a normal influx of inventory continued to occur (not happening), it would still take months to get to a balanced market. 
    • Based on what is known now, the majority of the market should be functioning again before a surplus of inventory occurs. 
    • Foreclosures and evictions have been halted in many if not most areas at this point. 
    • Banks, state, and federal agencies are implementing procedures to minimize displacement. 
    • As with all things in real estate - it's local.  There will be pockets of opportunity, but it is not likely we will see an overall market drop. 
    • Please give us a call (404) 239-7512 if you would like to discuss this in greater detail relative to your specific goals.
  • What are virtual showings?  We are offering virtual showings in several formats. 
    • Videos of a property
    • Face Time
    • Skype
    • Photos + Phone Call
    • What's the easiest mode of communication for you?
    • Since there are a few additional factors to navigate, we are asking for a little more notice so we have time to coordinate all of the required elements.  If you are interested in several properties, we are more likely to do them as virtual showings first, and then set up a limited number for in person viewing if you like the virtual showing.  This provides the best opportunity for us to help everyone move forward while reducing exposure.  Just reach out (404) 239-7512, and we will gladly discuss your situation.
  • What does a social distance showing look like? 
    • We are asking anyone who is sick or suspects they have been exposed to COVID-19 to delay showing requests until they are well and / or have made it through the appropriate quarantine time.  We will gladly perform virtual showings for you.
    • We will meet you at a property rather than drive you to each showing
    • We will not shake your hand or stand close together
    • We will use disinfectant on the lock box and door knob(s)
    • We will use wipes and / or gloves to turn the lights on and set up the showing so you can move through the home without touching surfaces
    • We will stand at a distance as we discuss the home
  • Are there contract provisions for COVID-19? The standard contracts do not include a stipulation covering this type of situation, but the attorneys for the Georgia Association of Realtors have put together a special stipulation that addresses likely COVID-19 issues and timelines.  We are including this in all Purchase & Sale Agreements at this time.

Mortgages / Lending

There are a number of factors affecting the mortgage industry at this time. To be sure, the impact of COVID-19 is being felt here, but the market fluctuations are having as much if not more of an impact.

  • The Fed rate reduction sent rates lower (along with the bond market)
  • Rates spiked as re-finance activity flooded the market
  • Liquidation of and lack of appetite for Mortgage Backed Securities (MBS) as private investors and funds tried to raise cash to deal with the stock market plummeting
  • Quantitative Easing from the government purchasing the flood of mortgage backed securities

Mortgage rates (as always) fluctuate constantly throughout the day, but we are seeing a fair amount of stability back below 4% at the moment. Please reach out to us (404) 239-7512 and your lender to discuss this in greater detail.  It is important to review the mortgage product and strategies (like a float down) to give you the opportunity for the best rate and loan.

The Federal Housing Finance Agency has directed Fannie Mae and Freddie Mac to provide alternative appraisal requirements and employment verification on loans the agencies service through May 17.

External Resources

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