After months of uncertainty, buyers and sellers are wondering whether housing markets will prove to be resilient this fall. A number of forces could influence the long-term health of the market: The release of pent-up demand after a muted spring season, uncertainty around whether schools will reopen, buyers motivated to move out of large cities hard hit by the pandemic, unusually low mortgage rates, and more.
In the U.S., home prices increased by 4.9% from June 2019 to June 2020, a CoreLogic report found, though the report also anticipated a 1% decrease in prices over the coming year, the first annual decline in nearly a decade.
That drop is relatively mild, given how the pandemic has put many markets on pause, led to mass layoffs, and sparked economic uncertainty globally. Real estate experts say that low mortgage rates, limited supply, and motivated buyers bode well for the upcoming fall season, traditionally a busy time for real estate. In the coming months, buyers and sellers must keep a close eye on transactions to get a sense of the resilience of the real estate market in the wake of coronavirus upheaval.
Overseas, certain markets have proven especially stable: Berlin, Amsterdam and Paris showed price growth of 3.1%, 3.0% and 1.2%, respectively, between December 2019 and June 2020, according to a Savills Prime Residential Cities report, which the study attributes to high demand and low inventory through the pandemic.
And one in four people surveyed in a Knight Frank Global Buyer Survey released Aug. 5 said they were more likely to move within the coming year as a result of the pandemic, with the U.K., Spain, and France as their most desired countries in which to purchase a home.
Both domestically and abroad, buyers must get ready to pounce as new inventory comes online in the autumn. Competition could be fierce as purchasers seek out properties in good condition that offer plenty of space, given the possibility of more lockdowns on the horizon.
In these final days of summer, “there’s a lot of imagination going on,” said Vanessa Grout, CEO of the sales and marketing division of OKO Real Estate in Miami. “People are online searching for their next home, and we’re seeing that our web traffic is up and digital marketing is paying off in a bigger way than before.”
In New York, some anticipate a big rollout of inventory after Labor Day, though even as the pace of the market picks up speed, sellers will need to adjust their expectations for pricing.
“Be prepared that it’s not going to be at a record-breaking price,” said Lisa Chajet, a broker with Warburg Realty in New York. “Anything renovated always has an easier time selling, but I don’t think we’re in the market of pricing for an aggressive bidding war. Price smart, with room to negotiate.”
Indicators to Gauge the Health of the Market
The extent to which markets stabilize this fall will vary based on local conditions pre- and post-Covid. In New York, for instance, an oversupply of high-end units was driving values down before the pandemic hit, and the city has seen values decline by 1% from December 2019 to June 2020, according to the Savills report. In Seoul, where the pandemic was better contained and home prices were already soaring, values went up by 5.5% during that same time period.
Buyer and sellers can gauge the stability of their desired markets this fall by tracking key indicators.
“One indicator buyers and sellers should keep an eye on is demand,” said Philip White, president and CEO of Sotheby’s International Realty. “Prior to the coronavirus, there were quite a few dynamics in play for homebuyers: low inventory, low mortgage rates, and millennial interest in homeownership. Despite the coronavirus, these dynamics are still at play, except now mortgage rates are even lower and U.S. supply is even more limited.”
Momentum is particularly strong in regions like Australia and New Zealand that have effectively contained the Covid-19 outbreak, he added, where pent-up demand is now being released.
In many cities in the U.S. demand hinges on the reopening of schools and offices, another factor for buyers and sellers to keep an eye on.
“Everyone is still waiting on schools’ decisions [in New York City], and a lot of banks and corporate offices are still not committed to reopening until January,” Ms. Chajet said. “If schools don’t reopen, I don’t think people are going to come rushing back.”
Comfort levels with dining out, traveling, and other lifestyle factors are a predictor of real estate activity in the coming months, as well. The Knight Frank report suggests increased confidence around travel, for instance, with more than 25% of survey respondents globally reporting that they have traveled internationally or plan to do so within the next few months.
Many wealthy New Yorkers fled the city at the onset of the pandemic, leading to a lull in demand in the city and a spike in the suburbs. In Los Angeles, by contrast, residents are seeking out larger homes within the city, and in June there was a significant rebound, with a 34% increase from the previous year in the number of contracts signed for homes over $2 million.
“We’re tracking one of the biggest years yet,” said James Harris of The Agency in Los Angeles. “Every deal we’re witnessing is circumstantial to Covid. People are moving out of apartments and into homes, realizing they need more land and will be working from home for the foreseeable future.”
Beyond demand in their desired markets, buyers and sellers alike should look to broader indicators of economic health.
“Keep an eye on interest rates, the stock market, the subprime mortgage world, currency,” Mr. Harris said. “All of the above go hand in hand. If the stock market remains shaky, people have always known that brick and mortar is the safe way to go.”
What Buyers and Sellers Should Do to Prepare for Fall
The pandemic put real estate activity around the world on pause and in many markets and led to dramatically reduced inventory, so buyers must be ready to act when a new listing catches their eye.
Buyers “should have their funds in order and be ready to put in an offer quickly,” Mr. White said. “They should also anticipate the bidding process to be competitive, as there will likely be a number of other interested buyers given the strong demand. It’s also essential that buyers looking to take advantage of low interest rates obtain pre-approval so that they are ready to make an immediate offer.”
South Florida, already a draw for buyers from the Northeast for its tax benefits, is seeing increasingly fierce competition at the high end, and this fall buyers should be prepared for bidding wars.
“Now there’s less supply, and we’re starting to see a frenzy,” Ms. Grout said. “Buyers really don’t have as much of a luxury to sit around and wait—now’s the time.”
In other cities, buyers may still have the upper hand in the coming months. In Manhattan, the number of new signed contracts for co-ops and condos fell by 56% in July compared to July 2019, the Douglas Elliman report found, as wealthy families headed for the suburbs. And with public schools offering blended learning plans, including the option for fully remote learning, many of those families may make their exodus from the city permanent.
Given these factors, Ms. Chajet said, “I would counsel a seller right now to be prepared. You’re not going to get a top dollar. If you’re a buyer, it's a great time to jump in, and there’s room to negotiate.”
Sellers of homes with specific features may find it easier to avoid negotiating with buyers and dropping their asking price. After months of lockdown, homes with plenty of square footage, on larger lots in more remote locations, and with extras like swimming pools and generous office space will have more appeal with buyers.
“Any residence that has a pool, terrace, or roof will trade at a premium,” Ms. Grout said. “A pool is the biggest driver, and that was the case even before Covid.”
Turnkey properties are also in demand, given that buyers want to avoid bringing strangers into their homes in order to renovate.
“People want houses that don’t require any work to be done, where they can bring their suitcase and toothbrush and move in,” Mr. Harris said. “They’re aggressively searching for completely done houses.”
Read the full the story by Alanna Schubach https://www.mansionglobal.com/articles/low-mortgage-rates-limited-inventory-and-pent-up-demand-could-make-this-fall-a-busy-season-218618