At the start of 2020, the housing market ramped up strongly, bolstered by economic gains, low mortgage rates and record stocks. According to the National Association of REALTORS®, February home sales surged 7.2 percent year-over-year, hitting a pace of 5.77 million, and home prices rose 8 percent—both encouraging figures for spring.
Now, with the coronavirus pandemic progressing, the housing industry is waiting, and watching. The February figures from NAR, while strong, reflect transactions in January, before the outbreak. Forecasting the impact is tricky, according to Lawrence Yun, chief economist at NAR, because the duration of the pandemic remains unknown.
“These figures show that housing was on a positive trajectory, but the coronavirus has undoubtedly slowed buyer traffic and it is difficult to predict what short-term effects the pandemic will have on future sales,” said Yun, who added that the market may shift, with the bulk of deals moving to later in the year.
“There will be a major fluctuation in some [home sales] data,” said Yun. “Whatever is missed out on for a couple of months will come up strongly with a rebound in autumn, provided that this situation is of short duration and the stimulus package provides for lost income. That would be the best-case scenario.”
Before the coronavirus, almost every indicator showed strength. In February, the adjusted annualized rate of sales, 5.77 million, came up 6.5 percent higher than in January and 7.2 percent higher than the prior year, and the median national price rose 8 percent, to $270,100—exceeding incomes substantially, but critical for homeowners, whose equity is the majority of their wealth, in most situations. In this time of uncertainty, that asset is vital, according to Yun.
“Unlike the stock market, home prices do have a stickiness; whatever their momentum is, they only slowly change from month to month,” said Yun, who noted that prices remained on the rise in the 1987 correction and during 9/11. “The only time nationwide home prices declined was in the Great Recession, due to loose subprime lending and overbuilding. [Today] we have tight lending conditions and underproduction. Housing wealth is the dominant portion for most middle-class families, and housing wealth will hold on well.”
In a separate survey, conducted March 16-17, NAR found homebuyer interest is softening, according to 48 percent of REALTORS®, as a result of the virus. Yun anticipates a rebound, once the current situation subsides.
“For the past couple of months, we have seen the number of buyers grow as more people enter the market,” said Yun. “Once the social distancing and quarantine measures are relaxed, we should see this temporary pause evaporate, and will have potential buyers return with the same enthusiasm.”
In the absence of the coronavirus, however, inventory remains scarce. At the end of February, there were 1.47 million listings on the market, a 9.8 percent decline year-over-year, according to NAR. Recently, construction had sprung up, but with demand falling, builders could hit pause.
“Housing starts finally broke above 1.5 million for the last three months, so there was a signal that the inventory situation could be improving through the latter part of the year,” said Yun.
Beyond inventory issues, what could restrict sales, REALTORS® say, is the need for in-person services throughout the transaction, like appraisals, certification of deeds and home inspections.
“We’ve been talking to regulators about whether external appraisals will be sufficient,” said Yun, who acknowledged the challenge of county deed offices shuttering, as well.
In addition, NAR is working with authorities on broader solutions, according to Vince Malta, 2020 NAR president.
“In the midst of this national emergency, NAR has been and will continue to be in contact with Congressional leaders and White House officials as they consider various policies to ease the economic impact of the coronavirus,” Malta says. “NAR is engaged in these discussions and presenting proposals that will support real estate and the people that make up the industry.”
As brokers grapple with the pandemic, they have innovated solutions, including being flexible with hours in the office, and holding opens virtually.
“Technology is coming to the forefront,” explained Matt Dolan, of Sagan Harborside Sotheby’s International Realty in Massachusetts, in a recent RISMedia story. “We are using technology and providing creative solutions to bring new options to buyers and sellers.”
“We have asked our agents to work remotely as often as possible [and] scheduled our team meetings to be hosted via video conference,” said Gil Torres, of Exclusive Realty & Mortgage in West Sacramento, Calif.
“We had open houses via appointment in 20-minute windows,” said LP Finn of Coach Realtors®, located in Long Island and Queens, N.Y. “People could come see the house, but they had to make an appointment online or through the office.”
“It is truly inspiring to see so many of our fellow REALTORS® and brokerages adjust on the fly,” Malta says. “Agents nationwide are keeping interest alive with innovative technologies, holding virtual open houses and computer-generated tours.”
As far as home sales, Yun anticipates the forecast for 2020 to shift—but to what degree is unclear, with so many questionable variables. In the coming days, NAR expects to have a new outlook ready.
“It will be interesting to note what will happen in the upcoming months…whether there will be investors trying to take advantage of the market turbulence, or first-time homebuyers beginning to move in with very low mortgage rate conditions, or even distressed property sales,” said Yun.
On March 18, the Federal Housing Finance Agency enacted an eviction and foreclosure moratorium, in effect for 60 days.