What will the housing market look like after Coronavirus?
It’s never easy to buy or sell a home—even in the best market conditions. During the Covid-19 pandemic, it’s become nearly impossible.
I know this firsthand. My wife and I listed our house for sale in late February, shortly before Washington state reported its first Covid-19 related deaths. We went under contract in less than 24 hours. Full ask. 30 day close. Everything was going exactly according to plan.
Until the Dow cratered and it all fell apart.
Our story isn’t unique in the new corona normal. The U.S. housing industry is on lockdown. New construction sales centers are empty. In most states real estate agents can't show houses. Inspectors won’t inspect. Appraisers can’t appraise. Even cash buyers willing to waive contingencies can't get an appointment. Closings for homes that went under contract before America put its economy on ice—if they happen at all—are now done virtually via Zoom, Docusign, and drive-through title companies in order to comply with stay-at-home orders and social distancing guidelines.
Real estate’s clobbering runs wide and deep. Hospitality, including hotels, restaurants, and bars, took the first body blow in early March, shut down by Gubernatoruial fiat beginning with California before spreading to states east. Malls, shopping centers, and sporting and entertainment venues locked down next, emptying almost every physical location where people densely gather nationwide.
Short-term vacation and AirBnB rentals, which briefly saw a reservation surge in popular tourist destinations and remote rural communities as people fled dense urban hotspots like New York City, were promptly banned by many local city councils fearful that their limited healthcare infrastructure and off-season supply chains would be overwhelmed by outsiders. Year over year short-term rental reservations for 2020 summer travel are now down by 75%. Hosts, many of whom rely on their short-term rentals for critical supplemental income or, in many cases, all of it, now credit Covid-19 for the “Cancellation Apocalypse”.
The effects of real estate’s upending further downstream have been equally swift. Many building supply wholesalers and hardware stores are shuttered, as are the majority of building materials factories and manufacturing plants across the country that keep them stocked due to quarantines and curfews for the workers who staff them. In some cities like Philadelphia, residential and commercial construction sites have been shut down altogether, except for critical need projects like hospitals and prisons.
Think about that for a second: In America’s fifth most populous city, where construction and housing have been booming after decades of stagnating development, swinging a hammer is technically, temporarily illegal.
Uncertainty is now housing’s greatest future risk. No one knows how persistent the coronavirus will be, how long America’s economy will remain locked down, or what the lasting social and emotional toll on how we live, work, and interact with one another will be. Humans, however, are innately collective creatures. More critically, our economy is fundamentally based on the act of congregating. When the state and local lockdowns lift and America’s consumer economy reignites, most restaurants, bars, and retail stores will likely experience more pent-up demand than they can handle after months of national isolation.
But what about housing?
Every economic crisis is intrinsically Darwinian, producing winners and losers while shifting the natural balance of power. So what will real estate post-Covid-19 look like when the American economy re-opens? What will the lingering impacts of trillions of paper money lost, long-term unemployment, and fears that the coronavirus could re-emerge in six months be? And how will the essential emotional calculus of buyers and sellers re-align in the new post-corona normal?
There are no simple answers. Opinions and models run rampant on how fast the economy will re-boot. Few economists believe that we’re in for the brutal elongated “U” that America experienced through the Great Recession. Most predict a more rapid corona “V”, especially for manufacturing and retail, pointing to the speed with which businesses and factories have re-opened in China and South Korea.
Buying a house, however, isn’t the same as turning the Frappuccino machines back on, or pulling the trigger on a bigger flat-screen TV in case we’re locked down again. Housing is an emotional, big ticket game, inextricably linked to macro-level downwind pressures on employment, wages, job mobility, the stock market, and ultimately, consumer confidence—whose quick resuscitations are still far from certain.
To get the most up-to-date intelligence on the present and future state of the housing market I asked a five of America’s top agents what’s happening on the frontlines.
Uniformly, every realtor in America right now seems to agree on one thing: the industry’s “non-essential” status in many states and cities is crushing the market—exactly when the spring selling season should be opening the flood gates.
For many real estate brokers, it’s hard not to whiff some political favoritism here. Pennsylvania Governor Tom Wolf put bike repair shops on his “life-sustaining” business list—as well as his own kitchen cabinet supply company—but placed realtors on lockdown. In Massachusetts, wood chippers still grind away since someone effectively lobbied Governor Charlie Baker’s office to make landscapers essential, while real estate agents sit idly at home.
Real estate’s non-vital status hasn’t gone over without a fight—including hours of internal debate at the highest levels of America’s largest brokerages like Compass and Berkshire Hathaway.
“Last Friday, the Pennsylvania Association of Realtors (PAR) filed an amicus brief supporting a lawsuit filed against Governor Tom Wolf,” explains Kristin McFeely, owner of Compass’s founding Philadelphia brokerage. “The lawsuit specifically requests that the Governor designate real estate services as a life-sustaining business, contending that the three essentials to life are food, clothing and shelter. The basic premise is that the Governor is preventing Pennsylvanians’ ability to gain shelter.”
McFeely, however, is also quick to acknowledge the more complicated moral and public health questions the lawsuit raises. Bringing a potential buyer into a stranger’s home right now undermines the essential premise of social distancing while increasing the unanticipated interpersonal contact that could accelerate coronavirus’s community spread in the very places Americans have been instructed to self-isolate—at home.
“I honestly have mixed feelings about it,” says McFeely. “While I can’t think of a time when people around the world have depended on their homes more completely than they do right now, I also have an obligation to my community to stay home and to keep my agents at home to flatten the curve. I think ultimately that we need to move the real estate industry forward in the coming weeks and months in a way that protects both the community and those involved in providing and receiving real estate services. And there’s no easy answer to that yet.”
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