Which Way Is Up For Real Estate?

This trek of isolating in our homes marches on. Hopefully some of our sunny days have helped to break the monotony and stress of isolation and lifted your spirits as we stay home to stay safe.

The real estate market was put on the essential business/services list just a few days after we were told we weren’t an essential business. That said, social distancing and personal safety, along with restrictions on movers, photographers, contractors, inspectors and home stagers all slowed the market activity level dramatically. We’ve since seen a release of these various jobs to open back up, but we’ve still seen a market slow down. Despite the recent publication of March sales and pricing data, all showing a continued strong market, we did see a pullback in new pending sales, homes sold but not yet closed. I expect we’ll see lower figures for closings and pending sales as we get into May and see the April figures.

Real estate has never seen such a giant swing in momentum in such a short period of time as we’ve experienced in the last 4 months. We had a sluggish early fall, with increasing market times and slower than normal sales but a steep decline in homes for sale that went on into March. December saw a big jump in sales activity and a corresponding jump in home prices. The lack of inventory and high demand made for quite a frenzy of multiple offers and new price highs. January and February continued very strong, even into early March which showed 55-58% of homes selling above their asking prices and average market times of 15 days or less for much of our region.

Then Covid 19 came to roost in our area and across the country and the World. We saw stock markets plunge and housing freeze. Quite a change in a 3-4 month period. The stock market plunge created panic in the Federal Reserve Bank, and they started buying Mortgage Backed Securities which created more troubles in the mortgage market and nearly collapsed the Secondary Mortgage market. This pushed interest rates up from the 3.375% range to over 5% and many lenders pulled out of the market altogether.

Calm is restoring in the mortgage market due to The Fed changing their behavior and time passing to allow lenders to get their books and balance sheets back in synch. We’re also seeing some rebound in the stock market as we see improving optimism related to the Covid 19 virus. So, what about the real estate market? With so many job losses and business closures, where will home prices go in the coming months? I wish I knew.

Economists and predictions vary widely, mostly due to any lack of true certainty over the Virus influence and impact. Most of us are hoping to be released from our homes by early May and then see some jobs and earning power restored. Unemployment is understandably high, but hopes are that we can see this decline over the next few months when the economy is open. Unemployment won’t drop back to its 3-4% range, but hopefully back below 10% yet this year. Hope is all any of us have right now.

The recent sales data do show a broad range of home values selling and generally across the whole Puget Sound region, so I’m optimistic that we’ll see a generally strong rebound in home sales. Not likely the frenzy of this late winter and early spring, but still a lively market. We’ve had 1,999 closed sales in the last 20 days in King and Snohomish Counties. We’ve also had 1,347 Pending sales and 364 Pending inspection sales in the last 20 days. That’s a bit over 1700 sales in 20 days of limited mobility; fairly active against a backdrop of 4,164 homes for sale in these 2 counties.

Real Estate, shelter, is an essential human need, along with food and safety/security. It offers us both shelter and hopefully some improved sense of safety and security. This means there is always “a” market. Every market has some holes within it; specific property types, locations or price points that are not as active as others. That will be the case in this recovery too. What I’m focusing on is the strength of many of our larger employers, their employee counts, spending patterns and the overall physical health of our region. This will help us have a more balanced market and housing opportunities for all.

Our social distancing seems to be paying off, even if taking longer that we wanted. I hope we can see a steady improvement in our physical recovery, no delayed or unexpected spikes in incidence or severity rates, so that businesses can re-open, re-hire and start finding our balance again. We will need more of us to participate in the physical and economic recovery to keep housing stable and a driving force in our economy.

No one knows with any certainty when or what the ultimate recovery pattern will be but I think most of us will be happy if we can see home values maintain close to their peak values attained this winter and our continued recovery in the stock market and our business climate. I have no fear of the market stalling out; we just have too much demand. We may well see a very lively initial bounce as families try to find their new homes this summer, so they’re settled in for the coming school year. My hope is that we have seen more of a deferral in market activity than a loss in market interest, ability or demand.

Some potential home sellers won’t be coming on the market due to their personal economic circumstances but anyone wanting or needing to sell should still find an ample supply of buyers looking for their new home in your neighborhood, hopefully inside your front door. Let me know if you’d like to talk about your particular market, concerns and circumstances. I’m always glad to talk with you.

Stay safe, home and healthy. Hopefully we’ll all be celebrating our release on Cinco de Mayo!

 

 

Photo by Jakob Owens on Unsplash

 

Posted on April 10, 2020 at 9:31 pm
Paul Isenburg | Category: In The News | Tagged , , ,

Covid-19 and Real Estate?

There’s no doubt, there’s a lot of fear in our local marketplace. Today we saw our stock indexes drop by 7% and even the good news of great jobs reports from last week, major drops in the costs of oil and record low interest rates can’t seem to win the headlines against Covid-19. So what’s ahead for our market? I wish my bald head was a better crystal ball for knowing the answer but here’s some facts that you may want to know.

We’ve been dealing with this virus for over a month now and we just had an amazingly strong February real estate market. Prices were up, sales were up–even in the face of drastically lower supply of homes which meant quicker sales and multiple offers for Buyers to compete against and Sellers to rejoice in. On the Eastside, 51% of homes sold at or above their asking price, up from 37% in January and 32% a year ago. The percentage over asking price was 34%, compared to 20% a year ago. That’s up 70% compared to last year’s over-asking price percentage. Single family home prices are up 9% over last year and condo sale prices are up 7%.

In Seattle prices remained flat while supply of homes for sale dropped almost 50%. The percentage of over-asking price sales and full price offers went up, almost identically to the Eastside figures. The same percentages and changes occurred for condos in Seattle as on the Eastside. A very strong market by all measures and the same strength is evident from Skagit to Pierce County as well as on the west side of the Sound. Our region is humming along very well.

Photo by National Cancer Institute on Unsplash

With the announcement of Covid-19 in our local region, some are fearing a significant pullback in sales enthusiasm but that’s not translated to reality yet. Open house traffic has been pretty steady over the last couple of weeks. Only time will tell if a pull back will occur but so far demand is winning the tug of war. Typically supply begins to match buyer demand as homes for sale normally spring up like daffodils and tulips as our spring bloom begins. I see no reason to doubt this cycle.

Interest rates have declined to record low levels and this has balanced out the move up in home prices. If the stock market continues to struggle, we’ll likely see more investor flight to safety and security and that often means Mortgage backed securities–especially since the last major recession and the improvement to the quality of these securities. This demand for security by investors should keep our interest rates low and a lid on upward pressures.

The overall strength of our economy and businesses is unquestioned. The Covid fears and transmission of that into the world and local economies is near-term troubling; possibly longer term for some industries like the airlines, cruise ship travel and the travel sector as a whole, but most predictions are for a bottom to be near. Likely we sit still here while we get better data on Covid-19 incidence and health risks/remedies but most indications I’m seeing are still in strong support of American business strength and the American economy as a whole.

Fear may trap too many of us in our homes and cause unnecessary harm to restaurants, entertainment and small businesses.  That would be a shame as most people are not sick and need not live shuttered in and in fear. Simple precautions and steps will likely help all of us weather this storm of concern and infection. Treating fear is much harder than a virus and recovering from the unintended consequences can take much longer to complete.

I see no reason to anticipate or expect any significant decline in our sales or prices even if our economies are bombarded by the fear virus on top of Covid-19. The local economy is extremely strong and diversified. Employment and wage growth are active in most career categories. Business expansion is widespread and seems committed to completion regardless of any short term setbacks or surprises. I’d prefer we only deal with Covid-19 but it seems the fear virus is too intertwined.

Negative economic impacts will likely keep our interest rates low for the balance of this year, allowing more affordable payments for homes and a cash resource for those looking to spend some of the equity in their homes. I’m not always a big fan of spending our home’s equity but this is likely the best time to consolidate other debts you may have and likely still lower your monthly mortgage payment as interest rates are very near 3% for 30 year fixed mortgages.

So, what’s the likely effect of Covid-19 on our local housing market? Barring an unusual set of unlikely possibilities, it will hopefully be minimal. Obviously any given family can be upset to devastated by this virus. I hope none of us has the misfortune to suffer this. Let’s all agree that we won’t let fear rule our lives and dictate our activities to an unnecessary degree. Housing is a change and need-driven industry for the most part; we have all the change and need pieces in place to keep our real estate market moving ahead. Stay safe, be wise and we’ll all get through this together.

Posted on March 9, 2020 at 11:21 pm
Paul Isenburg | Category: In The News | Tagged , , , , , ,