SOUTHEASTERN, N.C. — Though there’s less inventory arriving on the market, home values are holding steady as the region adjusts to a Covid-19 economy.
A fluid and healthy real estate market is important for the hundreds of thousands of people living in the region who have invested their life’s worth into their home (or, in some cases, second home). If times get tough, it’s important to know there’s security in that investment.
Sales activity lags behind because of the nature of work involved in completing the serious transactions. That means the pandemic’s true impacts on the real estate market didn’t begin to show until April, with the months ahead set to provide even more insight as to how firm the industry will hold on.
A new shopping experience
“While we thought that we were going to have a catastrophe with not being able to do anything, it’s maintaining,” Cape Fear REALTORS® President Tony Harrington said in an early May interview.
Government orders didn’t explicitly single out real estate showings. But when statewide business activity clamped down in March, physical showings took a steep dive. “Showings tanked. It stopped everybody because we didn’t know how to react at first,” Harrington said.
In the south, physical showings were down 17% in March compared to the year prior, according to data collected by ShowingTime. But thanks to advances in the industry that were already heading toward an online-heavy home shopping experience, internet showings soared, Harrington said.
A client even went under contract for a property they’d never physically seen before through his company, The Property Shop, Harrington said. High-definition photos, videos, and marketing material are now no longer reserved for the highest-end clients or agents. “Now, it’s expected,” he said. This material already being available online has helped both buyers and sellers transition into the new, Covid-19 economy. Nearly all buyers had grown accustomed to finding properties on their own before reaching out to a professional even before the pandemic, he said.
Three months into local restrictions, Harrington said all parties have had the chance to gain confidence in how to safely tour a home. Potential buyers touring The Property Shop listings will be greeted with doors already opened and lights on to prevent any unnecessary touching of surfaces, and a sanitation station stocked with wipes, sanitizer, gloves, paper towels, and spray.
“Realtors are more comfortable with how to show a property. They’ve gotten their mojo back,” he said. He expects physical showings to creep back up in the coming months.
Dip in inventory
Most real estate transactions represent a 30-day delay. Sales and listings are put into action weeks before the transaction makes an official mark.
Half a month into the shutdown, March’s real estate numbers in the Cape Fear region showed little to no volatility. The effects of the pandemic showed up in April’s figures, with new single-family listings in the tri-county area down 31% compared to the year prior — 367 fewer listings. The same was true for condos and townhouses, with new listings down 39% with 107 fewer new listings in the tri-county area.
At the same time, closed sales in April (initiated at least 30 days prior) held steady, up 2.5% for single-family homes compared to the year prior. Pending sales, representing a shorter time-frame representative of Covid-19 slowdowns, were down 13% in single-family homes and 41% for townhouses and condos.
That means in April, fewer products were reaching the market and fewer purchases were being made. Doesn’t that mean the decreased demand will force a price squeeze, decreasing home values? Not exactly, or at least not yet.
In fact, in April, the median single-family sale price in the tri-county region was up 2.4% over last year to $285,000 in the tri-county region — close to the region’s all-time high. There continues to be a huge demand for homes under $300,000 and $200,000, with homes priced affordably selling more quickly.
Last weekend, Logan Developers sold 75 homesites during the launch of the new Hampstead community Salters Haven, bringing in more than $15 million, above the company’s expectations. The combined lot and home packages range between $500,000 and $1 million. This activity won’t impact the region’s sales data until next month, when May’s figures become available.
Harrington said the biggest concern he’s hearing from agents and clients alike is whether the recent decrease in activity will impact values. “We’re not seeing that yet. If we can get back in the short term, I think that we’re probably going to maintain and not see too much of a decline in value. But we’ll see.”
A home’s market value is a two-way tug, representing what sellers are willing to let their property go for and what buyers are willing to pay.
Fannie Mae predicts home values will drop slightly during the third quarter of the year, eventually shaving off nearly $20,000 by the first quarter of 2021 before rebounding back to even higher, pre-Covid-19 values by the second quarter of 2021, according to Millionacres. Freddie Mac estimates values will drop by 0.5% over the next year.
Harrington, also a licensed appraiser, said he will be keeping an eye on foreclosures in the coming months, which could signal banks or sellers in forbearance on their mortgages are willing to accept lower prices.
“Do I think that we’re going to see some short sale and foreclosure properties because of all that’s happened? Probably so,” he said. Even if banks defer payments, the debt is still due eventually, he said. “How many people are going to catch up?” Harrington asked. Only time will tell the extent foreclosures will impact the overall market.
After 2008, foreclosures dominated Harrington’s appraiser orders, but after a decade of economic recovery, they have significantly waned. “We’re not there right now. We see a very small percentage of that in our overall market,” he said.
Realtors are accustomed to market fluctuations, Harrington said, and are already quickly adjusting. “We’re used to the highs and lows of business in real estate. We’re used to this. We’re in a deep this. But we’re going to come back out of it,” he said.
New listings represent a mix of both new and old products. In a home video, Brunswick County Association of REALTORS® CEO Cynthia Walsh explained last month’s new listings drop off as “no surprise” (also in the video, Walsh features her “coworkers” — her two boxers — dressed in business casual shirts).
Reached Friday, Walsh said she suspects the reason behind the listings slump was simply an adjustment period to new pandemic protocols.
“If I was a seller in that position, I would think to myself, ‘There’s a pretty good chance I’m going to sell this in the next 30-60 days. Can I do that?’ Do I really want a bunch of random people walking through my house at this time not knowing what this virus is?”
She said the dip was prompted by a natural hesitancy and fear of the virus on behalf of sellers, not for a lack of a desire to sell. “I think it was more precautionary,” she said.
Though there was a sharp decline in new listings, Walsh said it wasn’t enough to put a dent in the absorption rate. The absorption rate calculates the amount of time it would take to sell all products on the market if homes continue to sell at the rate they did the previous month if no new products are listed.
A healthy market has between four to six months worth of inventory, Walsh said. “We’re still there,” she said. During the “dark ages” of the Great Recession, the market had 18 months worth of inventory, she explained.
Less inventory means the absorption rate decreases, spurring bidding wars, with more buyers than homes. Too much inventory means the opposite.
For instance, the triangle real estate market has limited inventory fraught with bidding wars, Walsh explained. “Yes, it’s super exciting for you as a seller. But when you look at it from a whole economy, top-down perspective, it’s not actually healthy. What’s healthy is to have brisk sales with inventory to back it up so the market keeps going,” Walsh explained. “We are not there, nor are we close to it.”
If they haven’t already, Walsh said homeowners should consider refinancing to capitalize on lower interest rates. “Your home is the number one biggest investment that people have. When you see that number, that’s like watching the stock market go up. For a homeowner, that could mean refinancing your house at these phenomenally low rates,” she said.
In all, Walsh is optimistic sales activity will level out in the coming months, as the community gets used to the new reality. “So far, our market is hanging tough,” she said.
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