COVID-19 And The Real Estate Market Update
Our everyday life has changed due to the Covid-19 virus, but our commitment to you and this valley hasn’t. Deemed an “essential service”, the Russell Shaw Group is open and here to discuss your options. Yes, we are still selling homes – but in a different way to minimize risk to the public and our clients. For 42 years in real estate – we have weathered every storm and this will be no exception. Our thoughts remain with everyone impacted by Covid-19. Please stay safe and healthy.
Can I Still Sell My Home?
Yes! But occupied homes present a different challenge than vacant homes. We have solutions. For instance, you can opt for “virtual” selling with no showings. Call us to discuss all of the options best suited for your situation and needs.
Are the IBuyers (Open Door, Offer Pad, Zillow, etc) still buying homes?
Reportedly, they have all suspending purchases (both new and under contract). Sadly this has left a number of home sellers who were under contract in the lurch with little to no warning. The good news is we can help.
Are home prices plummeting?
The short answer is no. At the moment supply remains very low. Around 30,000 to 35,000 homes for sale represents normality. Currently the supply of homes for sale is well under half the homes needed for a balanced market. Although we have seen a drop in demand due to the virus, buyers who have been unable to purchase previously due to constricted supply are out buying now.
Are there any buyers still buying?
Yes. Again, the housing market has been so short of available homes for the last few years that most buyers in the 300K and under price point were being outbid. Those people are now placing offers. People must live somewhere. Shelter, like food, is not optional.
Are lenders lending?
Yes. We have seen fluctuations in lending guidelines – so it is important to discuss with a qualified lender what the current guidelines are. Uncertainty in financial markets tends to result in revised FICO score standards and debt/income ratios.
Is this just the housing meltdown or a bubble bursting all over again?
No. The virus and its impact is very different from “the bubble” of 2005 and its subsequent bursting. The best explanation of why these are different comes from the Cromford Report and the brilliant Michael Orr.
“In 2005 the housing industry started to sicken because homes were being used as speculative commodities not for places to live….
In 2020, housing is an innocent bystander to a probable recession caused by a pandemic. It has supply at extremely low levels and most homeowners have a large amount of equity. Even if they lost all their income and could no longer pay their mortgage, they could quickly find a buyer to release that equity. There is little likelihood of them facing foreclosure because the lender can be paid off with the sale proceeds. Only when demand collapses do the banks have to foreclose to get their money back. At the moment demand is still well above normal and has only shown very tiny signs of easing. In 2006 demand fell off a cliff yet home builders continued to build even more new homes because lenders continued to write ill-advised loans in huge numbers.
In 2020 builders are probably going to have to build fewer homes than they wish because of shortages of labor and materials. We are unlikely to see a glut of homes on the market for a very long time. A successful vaccine for the novel corona virus is more likely to appear before a surplus of homes could possibly develop.
Because the virus has not been contained yet, except in several parts of Southeast Asia, we are likely to see a lot of people out of work. We do not yet know how long it will take to get control of the pandemic in Arizona, but many people may be out of work for quite some time. These people are more likely to be renters rather than homeowners. Landlords may find it much harder to collect rents and the yields from their portfolios are likely to fall. Some may decide to evict tenants and sell their properties. At the moment the extra supply would be welcomed and receive multiple offers, even in these troubled times. The evicted tenants still exist and therefore still represent demand for shelter of some sort. There will be hardship, but not a flood of homes with no-one to live in them.
Housing demand is created by the existence of people and increases when more people turn up and decreases if they go away. In 2005 the people we were building new homes for were largely imaginary. In 2020 they are very real and migration trends have been very favorable with families and individuals moving to Arizona from other parts of the USA.”
What does the future of real estate look like?
The level of uncertainty is so extreme right now that forecasting the future would be foolhardy. But, we do track the numbers and the numbers can answer the state of the market on any given day. We will endeavor to keep our information current on our website and post videos as time allows.