First, we hope this finds you and your families safe and well during this incredibly difficult time. With all of the uncertainty ahead of us we still wanted to keep you informed on the status of the real estate market.
We were beginning to see an increase in activity and market optimism after a sluggish 2019, and Spring 2020 was looking promising. Unfortunately, the pandemic came into play, and while transactions are still taking place, virtually, the real estate market is in somewhat of a holding pattern. Showings have been barred by the Governor's office for the time being. If the pandemic slows down in the next month or so, we expect to see a sharp increase in sales throughout the summer and quicker normalization. If the pandemic carries into the summer and unemployment numbers continue to rise, we expect prices to go down and a longer road to recovery.
Adapting to a New Virtual Normal We are all in this together, and have a responsibility to socially distance ourselves from one another. While doing our part in flattening the curve, all facets of the real estate market are quickly adapting to continue to service our clients.
- Showings - Open houses and in person showings are off the table. We’ve transitioned to pre-recorded video walkthroughs of our apartments along with facetime virtual tours.
- Due Diligence - Many managing agents and building boards are now releasing minutes via email, something that used to have to be reviewed in person. They’re also transitioning from paper based applications to pdf or online applications.
- Appraisals and Inspections - Both now being done virtually.
- Approvals - Board interviews are now being conducted over platforms like Zoom, Skype or Facetime
- Closings - Closings are being done ‘virtually’ with documents getting pre signed, and the use of wires instead of checks.
Transactions are still happening but they certainly take longer, as there are many moving parts that need to align.
Current Market Metrics The pandemic leaves a lot of uncertainty as far as where real estate will go. What we do know, as far as the immediate effect, is that supply is down 28% compared to last year and 21% compared to last month. Many owners have decided to pull their listings from the market and new inventory is virtually non-existent, down 48% compared to last year and 33% compared to last month. Having said that, pending deals (demand) is down only 2% compared to last year and 4% compared to last month. The ‘market pulse’ (pending-to-active ratio) is actually up 36% compared to last year and 22% compared to last month. This market pulse is showing that leverage is moving in favor of sellers. However, the ratio is being skewed by the amount of shadow inventory (homeowners that want to sell but are pulling their apartments off the market).
Stricter Lending Beginning this week, Chase customers applying for a new mortgage will need a credit score of at least 700, and will be required to make a 20% down payment of the home’s value. The change highlights how banks are quickly shifting gears to respond to the U.S. economic outlook and stress in the housing market.
Rent and Mortgage Pause? With 6.6 million Americans now recently unemployed and nearly a third of renters unable to make rent for this month, a federal pause on rent and mortgage has been widely proposed.
About two million homeowners are skipping their monthly mortgage payments, according to industry data released on Monday, a number that is forecast to rise further as more Americans lose their jobs as a result of the coronavirus pandemic. Approximately 3.74% of home loans are in forbearance as of April 5, according to Mortgage Bankers Association data, up from about 2.73% the prior week.