“No Recession Predicted For 2020”—That was the first paragraph in my January article for BUILD Des Moines. The key word was “predicted”. Nobody could have anticipated that the United States and over 140 countries around the globe would become crippled by COVID-19. It’s times like these that you discover what is most important in your world.
I’ve spent the last couple of weeks trying to decide how best to present the current local real estate market stats and keep the focus on the coming changes as our economy is tested beyond imagination. As of this writing, it’s being reported that the United States has lost between eight and nine-million jobs while the stock market has lost all of the gains that it had accumulated since President Trump had taken office. Times are truly unprecedented. The key question is what role real estate will play to help lead the recovery.
In this article, I’m going to review historical data and identify market activity trends. These areas of focus are Homes for Sale & Pricing Trends, Pending Sale count activity, Months of Inventory, and Open Houses. I will end with predictions of what changes we can all expect in our industry business practices moving forward.
Homes for Sale
Sometimes you need to stand back from a photo to see the whole picture. If you focus only on the last 30 days, the home inventory levels do not seem to be too far off of the mark for a normal year. However, when you look at the year-to-date listing activity, you can see that home inventory is leveling off as homebuyers begin to step back and home sellers hold off on listing their homes. I believe this will all correct itself once everyone is able to get back out into the community and go back to work, restart social activities, and resume outdoor recreational activities. As far as pricing of homes for sale, that number does not appear to have been affected. The median list price for year-to-date is currently at $260,000.
Pending Sale Activity
Pending sales started the year off ahead of last year right out of the gate. March 1st was about the time that it became apparent that the coronavirus was going to be affecting the real estate market. Although open houses had not yet been affected, there was a lot of press regarding lowering mortgage rates down near and ultimately below record levels. At one point a buyer could have gotten a 30-year fixed rate conventional mortgage for 2.75%.
Throughout the month of March, I believe that low mortgage interest rates were the driving factor that kept home buyers out looking at homes and writing offers. If you were only looking at Pending Sales numbers, you would have no idea that the world was in turmoil. In fact, as of March 28th, there were 2,600 homes under contract—475 more than a year ago. The last couple of days are hinting that the Pending activity may have hit the peak for now, but time will tell.
Months of Inventory
The best indicator of the market can be seen by looking at Months of Inventory (MOI). This stat takes into account the number of homes currently for sale and the accepted offers in the past 30 days. Just this past week we are beginning to see the Months of Inventory rising. There is a definite narrowing of MOI compared to last year. Certainly not enough of a change for the market to notice yet, but it’s almost certainly on its way as more and more people are taking the advice of staying in and limiting outside exposure.
The one area of the market that is most telling of change is Open Houses. March 1st there were 829 homes open of which 350 homes were resale (highest number of resale homes open on a weekend so far this year). Even the next week, with all the talk of the virus, there were 773 total homes open representing 22% of the total homes for sale inventory. By the next weekend however, Open Houses dropped by more than half of the previous week with 334 homes open and only 92 of them resale. This last weekend of March saw another drop to only 303 homes open (77 resale and 226 new construction).
There is no doubt that Covid-19 has affected the real estate market locally and around the world, but the real question is what changes will remain long after the virus is gone? As much as I like to analyze historical data, I will make a prediction of some changes we will see moving forward.
- There will be fewer open houses of resale homes as homeowners continue to be cautious. New construction will continue to hold opens as that is their best method of marketing new homes.
- Agents marketing resale properties will restrict overlapping showings—where no more than one agent with buyers are in the home at the same time.
- Social distancing will become common and most buyers will drive themselves to showings following their Realtor to each home.
- Sanitizing services will expand in the marketplace and become a negotiated contingency in purchase contracts that the home will be professionally sanitized at the time of sale.
- In the short term, expect to see sellers require foot covers (like they do in new construction) and even the requirement that buyers sign disclaimers whether or not they have had the coronavirus or been in contact with someone that has.
- What was the beginning of the Spring real estate market will move into the early summer months and business will be much more active until the beginning of fall. Remember, many homeowners decide to put their home on the market as school is coming to a close in the spring. Schools are most likely now finished for this academic year.
- Virtual tours and Video will be the new norm in our business. Remote technology tools will require some Realtors to adapt or be left behind. Buyers and Sellers alike, will look at their homes from a new vantage point of functionality.
- Lastly, what had been an “easy business” to get into is likely to be a lot tougher as newer agents to the industry struggle to earn an income during an extended down time. I predict that the number of Realtors working in the business will drop, as established agents are best poised to ride out the economic recession and be ready when the market returns to a new normal.
A complete and comprehensive analysis of Des Moines Real Estate 2019 Market Review and more can be found by going to facebook.com/SimplyDesMoinesStats on Facebook.