Is COVID-19 another real estate housing crisis?
The coronavirus (COVID-19) has put countless futures on hold, but it seems unlikely to mimic the housing crisis of 2008. Nonetheless, Buyers, Sellers and agents all want to know how COVID-19 will affect the real estate market. While it’s impossible to know for sure, the market has provided a few clues. Let’s look now at what we might be able to expect from real estate in a COVID-19 world.
The real estate market may slow down, but for different reasons than in 2008
A big fear among everyone involved in real estate is that COVID-19 will have similar effects as the housing crisis of 2008. However, that seems unlikely this time, which may be good news in the long run.
The explosion of the housing bubble in 2006 led to the Great Recession in 2008. But the housing market in 2020 is vastly different. It’s much more difficult to get a mortgage in 2020 than it was in 2006. More stringent qualifications mean that fewer under- or unqualified Buyers can get a mortgage. Also, unlike in 2006, there’s a massive inventory shortage in 2020. This means that there may be fewer defaults, foreclosures and houses stuck sitting on the market, which were the primary drivers of the 2008 crisis.
Additionally, in March 2020, Fannie Mae and Freddie Mac ordered lenders to give mortgage holders more flexibility to pay. Certain qualified homeowners who contact their lenders may be able to delay mortgage payments for up to 12 months. This may tamp down any panic among homeowners who recently lost their income due to COVID-19 furloughs or layoffs, preventing the kind of crash we saw in 2008. As an agent, consider educating your clients about their loan forbearance options.
Though a crash like 2008’s is extremely unlikely, that doesn’t mean COVID-19 isn’t already making life extremely difficult for Buyers, Sellers and agents.
Buyers may hesitate to make bigger purchases until COVID-19 is under control
Through mid-April, unemployment rates have grown exponentially throughout the US. Whether because of layoffs or furloughs, millions of people have lost their income due to COVID-19. The uncertainties surrounding employment, the markets and the economy are likely to force interested Buyers to pause on a purchase.
Likewise, most states have enacted stay-at-home orders. This prevents Buyers from doing in-person walkthroughs. It can also make home inspections difficult or impossible. These are 2 foundational aspects of home buying. Buyers who are used to seeing things for themselves and getting proper inspections might be tempted to put everything on hold.
How agents can help Buyers through this roadblock
When chaos reigns, Buyers will look for anyone who can guide them with confidence. Here are a few ways you can do that.
- Be diligent in staying in front of your clients. There’s a lot going on during the COVID-19 pandemic. Buyers might be tempted to push any buying decisions off to an undetermined future. Even if your Buyers absolutely must pause their buying process, you can and should still stay top of mind. Whether it’s a useful article or infographic that you share, or a friendly “checking in” email or phone call, do your best to show you care.
- Offer virtual tours. Virtual tours can keep your clients moving forward in the process. Keeping your clients engaged in the process is crucial to everyone’s success. While it may not be possible to do in-person tours or inspections, you can still help clients prepare for the future with virtual tours. Where possible, consider doing a live virtual tour through apps like FaceTime, but do not disregard stay-at-home orders to do so. Though many states consider real estate sales essential, not all do. Double-check before you consider live virtual tours.
- Remind Buyers about low interest rates. Though mortgage rates are still volatile, they’re also well below average. Hesitant Buyers who have the means to close have a huge advantage. They can potentially save tens to hundreds of thousands of dollars on interest payments over the life of their loan. This may convince cautious Buyers to consider buying while rates are low.
- Don’t let perfection impede progress. With so much uncertainty, it’s easy to feel pressured to be perfect in everything you do. But you were an expert before COVID-19 and you’re still an expert during it. Don’t let the pursuit of perfection impede the progress you’ve made with your clients. Be confident and extra diligent in your research as you help your clients pursue their goals.
Sellers may reconsider their listings altogether
Between stay-at-home orders and surging unemployment, Sellers have major obstacles that may have them reconsidering their listings. For example, according to the Washington Post, March 2020 saw a 15.7% national drop in the number of homes for sale when compared to March 2019. This translates to about 191,000 fewer listings compared to last year, according to Realtor.com. There are 3 primary reasons that Sellers may reconsider listing their homes during the COVID-19 outbreak.
- Fears of virus spread. The idea of having strangers potentially spreading the virus during open houses may depress listings. Though many states have stay-at-home orders in place, it only takes one person breaking the rules to ruin everything.
- Following stay-at-home orders. On the flip side, stay-at-home orders may have Sellers wondering whether now is the right time to move everything and everyone to a new, unfamiliar location.
- Fears of falling prices. Many Sellers worry that decreased demand will lower their sales price.
However, it’s not all negative for Sellers. For example, median listing prices still increased compared to March 2019, albeit more slowly than anticipated. Additionally, economists, like Danielle Hale, tend to believe that home prices won’t fall nearly as drastically as they did in 2006–08. And though home sales may fall during the worst months of COVID-19, those same economists anticipate a strong bounce back once the virus is under control.
How agents can help Sellers through this roadblock
Agents can use their expertise to help Sellers navigate their fears about selling during COVID-19.
- Encourage Sellers to keep the home tidy. Even though walkthroughs will be rare and there may be fewer Buyers, the Buyers that are looking will still have expectations. Keeping the yard and interior tidy for listing pictures and videos is even more important when people can’t see it for themselves. Wherever possible, provide staging tips to your clients to give them the best shot to sell in a bad situation.
- Consider committing to easy upgrades. Stay-at-home orders may make comprehensive upgrades impossible. But a fresh coat of paint and proper lawn care can boost the home’s value and make it more appealing to virtual Buyers. Most states still consider hardware stores essential, which can help you and your clients commit to some DIY upgrades.
- Leverage the internet. Most Buyers, especially younger Buyers, do a ton of their own research online before they commit to a home. This is especially true with everyone essentially locked inside for most of their day. There’s never been a better time to leverage the internet to sell your clients’ homes. Use photos and videos to frame your clients’ homes in the best possible light.
- Protect Sellers with a home warranty. A home warranty can protect Sellers against common breakdowns during their listing. With more people working from home and using their systems and appliances more frequently, breakdowns are much more likely. 2-10 Home Buyers Warranty (2-10 HBW) offers complimentary Seller coverage where allowed by law ($60 in Florida) to protect Sellers against the costs associated with those breakdowns.
How 2-10 HBW is working with agents through COVID-19
Though the effects of COVID-19 on the real estate market will remain uncertain, 2-10 HBW’s commitment to agents is as certain as the sunrise. We’re working to help you protect your transactions, speed up the sales process and reduce the cost of home ownership for your clients. Here’s how we’re doing that.
- We’re open for business and working hard from home to help you minimize business interruptions during these unprecedented times.
- Our online Agent Portal is always available. Agent Portal is the fastest and most efficient way for you to process new enrollments, check the status of an enrollment, view warranty documentation, or download resources and marketing materials.
- We are dispatching service requests as usual. However, service may be delayed due to contractor availability.
- We’re working hard to provide agents with valuable materials that keep them and their clients engaged and informed.
One day soon, things will return to normal. Buyers will once again walk through their future homes, and Sellers will sigh in relief that their biggest financial transaction went through. Until then, 2-10 HBW will support you in doing everything you can to guide your clients through the COVID-19 crisis.
2-10 HBW offers comprehensive systems and appliances home warranties to help protect your clients from unexpected repair and replacement costs. Contact us to learn more.