Covid-19, and its Impact On Real Estate So Far
At the time of writing this newsletter, Colorado is under a statewide Safer-at-Home order. Coloradans are no longer ordered to stay home but are strongly advised to stay at home. According to the State of Colorado’s website, “People should be prepared for state and local public health orders to be extended, amended, or changed as needed to protect public health. This means we may move between the different levels during this pandemic.”
Some counties have elected to extend the Level 1 (Stay-At-Home) order until May 8th. In counties that have moved on to the Level 2 (Safer-At-Home) order, critical businesses are open and non-critical businesses are operating with restrictions. The number one priority is to stay safe and to stay healthy.
In uncertain economic times, people become anxious. Along with that comes a lack of consumer confidence, which can obviously impact the housing market.
Real estate has been listed as an essential business in the statewide executive order but it is not business as usual. Much caution is warranted. However even in a crisis, people need a place to live, and in some situations they have a critical need and find themselves in between homes due to circumstances out of their control.
We began March with record-high numbers. Showings were up compared to March of 2019. We had about a one-month supply of single-family homes on the market (a balanced market is a 4-6 month supply). That means we only had 25% of the inventory needed. Sellers were getting multiple offers and buyers were getting outbid. This continued through the third week of March. In the final week of March, showings and under contract listings began to slow down. Closings within our brokerage finished at about 7% less than 2019. Given the state of current affairs, this was much better than anticipated.
In April, we saw many sellers take their homes off the market with the plan to re-list in the next few months. Many sellers who had originally planned to list their homes in March and April decided they would hold off on their plans for a few months as well. Despite this, there were still many buyers in the market. Even if half of the buyers in the market dropped their plans to buy, there still would have been more buyers than sellers. The buyer demand would have to drop by 75% to create balance in the market, and we have yet to come anywhere close to this.
Real estate is a supply and demand market, just like all financial markets. Even with fewer buyers in the market, there was still a shortage of inventory. Homes that were priced right and in good condition continued to sell quickly. We did see buyers being more cautious and spending more time researching homes online. Homes that showed well online continued to have in-person showings. Buyers tended to pass on in-person showings for the homes that did not show well online. The best homes still received multiple offers. Overpriced listings still sit on the market longer, which is the case under any market condition.
How Will All Of This Impact The Real Estate Market?
What does this mean for the future? No one has a crystal ball; however, we remain optimistic. Most agents in our company have a packed pipeline of buyers and sellers that still want to buy or sell, they just want to wait a month or two. We are anticipating that transactions that might otherwise have closed in April, May or June, might now close in July and August, artificially extending the selling season. Of course there will be buyers that are out of the market due to job loss, fear, etc. There may also be some sellers that decide not to sell either out of fear or financial hardship.
The April 6th – April 26th suspension we had on in-person showings will most likely create an even larger backlog in housing demand. We anticipate everyone will jump in at the same time.
It is safe to bet that 2020 will have fewer closings than 2019, but will it be enough to drastically impact real estate prices in a negative way? Time will tell, but unless we see a significant increase in inventory… our guess is no.