In States Loosening Lockdowns, Will Real Estate Markets Rebound?
In the past few days, several states have begun the highly controversial process of loosening stay-at-home orders and restrictions put in place to combat the spread of the deadly novel coronavirus. In the coming days and weeks, many more states, counties, and cities will follow examples set by states such as Georgia, Texas and Colorado as lockdowns expire at the end of the month or in early May.
The impact of these changes won't be felt just by the small-business owners who choose to reopen and the customers who begin resuming their lives in this new normal. The easing of these restrictions will also be felt by the housing markets in these places. But how quickly—and strongly—will they rebound from their period of deep freeze?
Real estate professionals are already reporting that the easing of these orders is resulting in a small boost in the number of listings coming online, and in a slight uptick the numbers of prospective buyers shopping around. This gives these markets a stronger start to what will certainly be a much slower than anticipated spring market.
"There's a clear link between the extent of the stay-at-home orders and the amount of buyers and sellers in the real estate market," says Javier Vivas, realtor.com®'s director of economic research. "The markets that reopen will see more listings come back onto the market. And then very shortly after that, we’ll see more buyers at open houses.”
The benefits to easing up on restrictions may give both buyers and sellers something of a psychological boost, too.
Sellers may feel more secure in allowing buyers to walk through their properties. And with local economies beginning to rev back up, buyers may feel more confident in their finances to pull the trigger on investing in a new home and moving. Both groups may believe that the worst of the deadly health threat is behind them, regardless of whether that proves to be true.
Part of that bump will come from the spring and summer being traditionally busier months for home sales, says Norm Miller, a real estate finance professor at the University of San Diego. Parents often want to move before the kids go back to school.
However, health experts have warned that allowing people to freely circulate again could lead to a rash of new cases, which would take a couple of weeks to emerge. And no one should expect the real estate market will get fully back to normal—even when the U.S. is open for business again. In the absence of a vaccine, there's still a deadly pandemic terrorizing the world, which will discourage many folks from listing or buying homes. More than 30 million people have lost their jobs or income, or have been furloughed, since the crisis began—and that number is expected to rise. As a result, it's now going to be harder for many folks to score a mortgage. Even those who are still employed may worry about the security of their jobs. And they may hold off on making what could be the biggest purchase of their lives until the economy improves.
That means there will be fewer listings, buyers, and sales even as the nation heads into what's normally the busiest seasons for real estate: spring and summer.
"When you get a sense that things are back to normal, [there could be] an initial boost of energy" in the housing market, says Vivas. "But pretty quickly there will be a reality check. You look at your finances and what's available on the market, and you do the math, and it pretty quickly turns into a difficult decision."
"We'll see buyers be more cautious," he says.
More homes are going on the market where lockdowns are eased
One of the biggest issues facing the national housing market is the lack of homes for sale.
Inventory is down annually just about everywhere, hitting a new low in supply for April, according to realtor.com data. But in most states that have allowed more businesses to reopen, inventory is beginning to trickle back onto the market again, even if just by a little.
"Places that have fewer physical restrictions and fewer [COVID-19] cases tend to see more sellers act as if this was just a regular spring home-buying season," says Vivas.
Take South Carolina. A stay-at-home order was issued on April 7, later than most other states, and has been extended through May 15. But the Palmetto State began loosening restrictions on April 20, allowing beaches and retail stores to begin reopening. Stores must operate at a reduced capacity.
In South Carolina, showings reached their lowest point around Easter weekend, says Charleston-based real estate broker Owen Tyler, of the Cassina Group. He's also president of the South Carolina Realtors®, the state's Realtor association. Since the restrictions have been loosened, he's seen a slight pickup statewide in the market—but nowhere near the normal numbers of buyers, sellers, and sales.
"They're ticking up slowly but surely," Tyler says. "We can see a light at the end of the tunnel. ... It does not feel like a forever situation."
Since Colorado started easing up on its own restrictions, Aurora-based real estate broker Cindy Dassinger has also seen listings nudge up in areas where in-person showings can resume. Real estate agents in Douglas County, near Denver, were allowed to give home tours since Monday. However, they're still not permitted in Denver County.
Many more listings, currently classified as coming soon, are likely to hit the market once showings resume in their respective counties, she says.
“The faster we can get small businesses open, the faster we can recuperate," says Dassinger, of Metro Home Finders in Aurora. "There are [fewer] buyers out there, but the buyers that are there are serious."
The restrictions on in-person home tours haven't discouraged buyers who need to move, say, for a job transfer. Folks have bought homes they've never set foot in, Dassinger says. They'll add clauses to their contracts stating they have the right to view the properties in person before the closings take place. This allows them to back out of any bad deals without losing money.
"We’ve had houses go on the market in the middle of this thing and go under contract within 72 hours, and some with multiple offers," says Dassinger.
Atlanta-area real estate broker Tim Hur is also seeing a few more listings go live and expects to see more as Georgia eases up on restrictions. However, he doesn't expect the normally brisk, spring buying seasons of years past.
"We’ll see a little more activity," says Hur, who's with Point Honors & Associates, Realtors. "But it doesn’t change the fact that people are still unemployed, they’re furloughed, or there are fears of COVID-19. ... There's a lot of more people sitting on the sidelines wanting to see how it all pans out."
More buyers may also return to reopening markets
Blue Ridge, GA–based real estate broker Faron W. King is also seeing a bit more interest from prospective buyers ever since Georgia let up on some of its restrictions. King, of Coldwell Baker High Country Realty, sells homes in the vacation area, which is popular with folks from Atlanta and Florida for its mountains and lakes.
"A lot of this is people with cabin fever" dreaming of leaving the city behind and moving to or buying a second home in the mountains, says King. He is also the president of the state's Realtor group, Georgia Realtors®.
But it could lead to even a slight uptick in sales, particularly as the country heads into the warmer-weather months when vacation homes are particularly appealing.
The demand is still there from buyers, many of whom have been stymied by the lack of homes for sale even before the crisis and sky-high prices. But those who've lost jobs and income may no longer be able to afford to get into the market. And many more may choose to wait out the crisis until they're more sure of their financial footing.
Being allowed to go back to work again may give at least a few potential buyers the psychological and even financial boost they need to pull the trigger.
Buyer "interest has been piling up," says realtor.com's Vivas. "By reopening, you're opening the door to that backlog."
However, the areas suffering from the highest numbers of COVID-19 cases will take longer to reopen. And while sales are expected to be down nationwide this spring and summer, these more affected real estate markets will be off to a slower start and take longer to rebound.
"There's going to be some uncertainty in areas that have had a worse experience with the virus," says Edward Goetz, an urban planning professor at University of Minnesota in Minneapolis. "Real estate markets [don't] like uncertainty."