Tuesday, March 31, 2020
Here is an excellent list of resources for anyone in need to tap into! Pass it on!
(Disclosure: claiming unemployment or asking for mortgage or rent forbearance may negatively impact your ability to qualify for a loan in the future).
Monday, March 30, 2020
Having some extra social distancing time on my hands (particularly challenging for an extrovert), I've been following the financial and, more particularly, real estate situation, and have been attending multiple webinars with several different lenders, employing brokers, realtors, and industry experts. It's hard to come to a good consensus of what's happening and what will happen, but I do know there are errors both extremes. The "ostrich optimists" as I like to call them think nothing has changed and buyers and sellers should buy and sell as usual "Cuz it's always a great time!" The doomsday pessimists think it's the end of real estate as we know it and we'll all be living in caves soon (and contact them to buy a luxury cave). The truth is somewhere in between. I am, however, very impressed by how Metro Denver real estate industry on all levels is adapting to this "new normal." And it is extremely important to understand that this is not 2008: the housing market did not cause this crisis as it did in 2008; the virus did.
But first, with this extra social distancing time I have decided to learn "Charts" in Excel (a very rewarding experience). I wanted to see how the weeks just before and after the virus until today have affected real estate market activity in Metro Denver (the 6-county Front Range "urban corridor": residential only). Here is the graph I custom made from the MLS timeline statistics:
-As you can see new listings were going up each week as is standard at this time of year, but didn't go up the same expected increment for the last 2 weeks.
-Homes going under contract also increased until this last week, when they dipped.
-Closings were increasing and then dipped for the last 18 days.
-Homes withdrawn from the market by sellers were very low until the last two weeks when they increased by over 500 in comparison to the previous weeks. Just in the last 3 days there were 151 homes withdrawn by sellers.
-198 homes and condos went under contract in the last 24 hours. That is a lot. I have personally spoken to listing agents who have received multiple offers on their listings just in the last couple days.
Is it smart or dumb to be buying right now?
This is a great question. It will take a month or two to really understand the economic impact of the virus, the printing of $2 trillion for the economic "stimulus" package, and the effects on the housing market. Could house prices go down? Possibly. It's the unknown that is always the scariest. As Warren Buffet says, timing the market is a fool's game. Buyers are definitely concerned, and are sitting on the fence for now. I do not blame them and am in fact encouraging that. Sellers are concerned, they don't want people in their homes especially if they are still living there, and sellers who would have listed now are waiting. I support their hesitancy and always advise to follow what the market is doing, and more importantly, safety first. Being that COVID-19 is spread asymptomatically as well, it is impossible to know if other buyers who are viewing the home are infected, what the state of the sellers are, etc., etc., etc.Spring is usually the peak of the buying and selling season. If people delay buying or selling now, it will most likely be transferred to Summer or Fall.
Real estate is adapting quickly:
- Real estate transactions have been named an "essential service" by the governor during the "stay at home" order. However, for precaution and public health safety the Denver Metro Board of Realtors and Colorado Association of Realtors and MLS have cancelled all open houses. Redfin and Zillow are not doing any in-person home tours but only virtual tours and using other technology instead. This also makes many buyers and sellers feel safer.
- The Colorado Department of Regulatory Agencies announced the Colorado Bar Association (“CBA”) has approved a COVID-19 Addendum to real estate contracts, that real estate brokers can use to “pause” pending real estate transactions where the parties want to close but cannot due to circumstances caused by COVID-19.
- Title companies are doing "drive-up closings" to practice social distancing, and guide you through your documents to sign over the phone.
- Appraisers are now allowed to do online or drive-by appraisals, not having to enter homes. If the buyer puts 20% down, many appraisals are waved entirely.
- Mortgage rates are all over the place right now with the government purchasing so many bond and mortgage-backed security assets. Several lenders have told me they have never seen such fluctuation in rates before. Yesterday rates were back in the 3%'s. To lock in a rate for a purchase you must be under contract for a home and ready to lock when your lender calls you and says "rates are low."
- Construction new home builds are still completing building and purchases.
The Government is Taking Extreme Measures
- The government is taking extreme measures to prevent an economic fallout (some might say too extreme) with a $2 trillion stimulus plan. This includes eviction and foreclosure moratoriums and possible mortgage holidays for people who lose their jobs and income, or if you are quarantined. This is definitely not 2008.
- The government wants to ensure the skyrocketing unemployment applications are taken care of, and have, for example, expanded the Dislocated Workers Grant program by $100 million.
- Tax payments have been extended till at least July.
- The government has expanded business loans are available to small businesses.
- Many businesses like Amazon, delivery businesses, online businesses, cyber security, and the customer service industry are needing many more workers.
Bottom line: It is very important to understand that this is not 2008: the housing market did not cause this. As I've repeated many times, with supply so low and demand so high, the Denver real estate market is not in a bubble (in 2006-2012, the supply was extremely high, and the demand was very low). The real estate industry has adapted quickly to this "new normal." Activity has remained strong, yet no one knows what will happen in the next month or so. We do know the government does not want our economy to be frozen for months. If you are not comfortable buying or selling right now, I would advise not to, also for public safety reasons and your own safety (I could see lawyers having a hay-day if a buyer who walked through a home tests positive for COVID-19: did seller have it? Did buyer have it? Who pays for hospital bills?).
Should this all start getting better by Summer, there will be a huge release of pent-up demand from buyers who planned to buy in the Spring but didn't, and sellers who also planned to sell in the Spring but delayed because of the virus. This would essentially push the Spring market to Summer and Fall. What I do know is real estate, being a physical and necessary asset to every human being and family (especially during "Stay-at-Home" mandates), is much more stable than the current stock market.
I sincerely hope you and your family are staying healthy, connected to friends, and physically distanced.