Some prospective sellers may want to pull their home off the market and wait out restrictions reacting to the spread of COVID-19. But a growing number of real estate professionals are asking their sellers to rethink that decision, even in areas hit hard, such as New York City.
But real estate professionals told Forbes.com that, for the homes they have listed, they’re reporting unprecedented traffic. And with housing inventory low, sellers could get more attention for their homes than in traditional spring markets where competition can be stronger.
For example, during the week of March 16, the real estate market firm UrbanDigs reported a 279% increase in the number of listings removed from the Manhattan market. In the second week of April, there were only 52 new listings; 157 listings had been removed from the market.
Meanwhile, listing views online are reportedly on the rise, and video tours are growing in popularity as buyers want to view properties for sale online. The listing site StreetEasy reported that the number of listings with video tours—including links to video walkthroughs–doubled on its website in March as COVID-19 hit the nation in a bigger way.
Potential buyers may have more time to browse listings online, Barbara Fox, president of Fox Residential, told Forbes.com. “I think we will see a pent-up demand from buyers who were poised to move before the pandemic, and still need to move ahead with their plans,” Fox says. “Many buyers are going to look at this as a good buying opportunity, and sellers should keep their properties prominently in front of them.”
Fox isn’t advising her sellers to lower their price either. “Many prices were reduced before this happened, and as activity resumes, there will be bargain hunters,” Fox says. “But as activity intensifies, as was happening prior to the pandemic, we will see prices firming up.”
Mortgage rates could be on a roller coaster ride over the next year, with the coming months looking to be particularly significant. In Fannie Mae’s Housing Forecast report, economists predict that the average 30-year fixed-rate mortgage for 2020 will drop to 3%, and then fall to 2.9% by 2021. Both would be all-time lows.
Many home owners with strong credit seeking to buy could see rates in the mid- or even low 2% levels, the mortgage industry predicts. “This would make buying or refinancing possible for many who can’t afford it right now,” according to The Mortgage Reports. A 2.9% mortgage rate instead of a 3.9% rate could raise homebuying power by $36,000.
The lowest average mortgage rate on record currently is 3.29%, which was set in March of this year amid COVID-19 fears, according to Freddie Mac. Mortgage rates have remained near historical lows ever since.
A year ago, mortgage rates averaged 4%. Homeowners and potential buyers can save thousands of dollars over the life of the loan from the drop in rates. For example, The Mortgage Reports uses an example of a $200,000 loan amount with a 4% versus 2.9% 30-year fixed-rate mortgage. Home buyers could potentially save $121 a month and $44,000 over the life of the loan.
“With a full year of record low mortgage rates, many homeowners would be able to refinance, reducing their monthly payments and overall loan interest,” according to The Mortgage Reports. “And prospective home buyers might be able to afford a house sooner than they thought—or buy a more expensive home than they’d be able to afford if rates were higher.”
The lower borrowing costs could help with housing affordability. Even with a slowdown likely in the housing market due to COVID-19, Fannie Mae economists are still predicting existing home prices to increase by 2.5% between 2019 and 2021.
While sheltering in place, more homeowners are taking on house projects. Stores that offer gardening supplies and building materials are weathering COVID-19, as retail sales of building materials, gardening equipment, and supply stores (paint and wallpaper stores and hardware stores) were up 7% in March compared to a year ago, according to U.S. Census Bureau data.
“This is a good time for home owners because gardening, yard improvements, and minor home renovation or simple do-it-yourself projects (deck) improve curbside appeal and reflect the kind of care and maintenance that home owners put into their homes, both external and internal,” notes Scholastica Cororaton, research economist for the National Association of REALTORS®, at the Economists’ Outlook blog. “Attractive gardens, a clean yard, freshly coated fences, mended pathways will make a home attractive to buyers, in the time of and after the coronavirus social distancing period.”
Past surveys show the importance of curb appeal when selling. Seventy-four percent of REALTORS® often suggest that their sellers complete a landscape maintenance program before selling, and 17% cited tending to the exterior as a selling point, according to NAR’s 2018 Remodeling Impact Report: Outdoor Features.
A landscape maintenance program could include applying mulch, mowing, pruning shrubs, and planting, with some 60 perennials and annuals to choose from. The 2018 NAR survey estimated a cost of $3,000, but expected a 100% recovery of that cost from resale.
The 30-year fixed-rate mortgage averaged 3.33% this week, near its all-time low, Freddie Mac reports.
“Mortgage rates have stabilized over the last few weeks as the market searches for direction in the fog of economic data,” says Sam Khater, Freddie Mac’s chief economist. “While financial markets initially rallied on the news of Federal Reserve support and are improving due to the Senate’s passage of a new small business stimulus, we continue to see a deep economic contraction amidst uncertainty about the recovery formation.”
Freddie Mac reports the following national averages with mortgage rates for the week ending April 23:
30-year fixed-rate mortgages: averaged 3.33%, with an average 0.7 point, rising slightly from last week’s 3.31% average. Last year at this time, 30-year rates averaged 4.20%.
15-year fixed-rate mortgages: averaged 2.86%, with an average 0.7 point, up from last week’s 2.80% average. A year ago, 15-year rates averaged 3.64%.
5-year hybrid adjustable-rate mortgages: averaged 3.28%, with an average 0.3 point, dropping from last week’s 3.34% average. A year ago, 5-year ARMs averaged 3.77%.
Freddie Mac reports average commitment rates along with average fees and points to reflect the total upfront costs of obtaining the mortgage.
The new-home market was showing a strong first quarter in 2020 until the pandemic hit. Sales of newly built single-family homes decreased 15.4% in March to a seasonally adjusted annual rate of 627,000 units, according to data released Thursday from the U.S. Census Bureau and Department of Housing and Urban Development. Sales were 9.5% lower than a year ago, and markets hardest hit by COVID-19 saw the largest slowdown in sales last month.
“Despite the sharp decline in new-home sales [last] month, the first quarter of 2020 was actually 6.7% higher than the same period last year, reflecting a strong pace prior to the virus outbreak,” says Dean Mon, chairman of the National Association of Home Builders. “While we expect to see some further impacts to the industry, we remain confident that housing will be a sector that will help lead the economic recovery.”
Inventory of new homes increased to a 6.4-month supply in March. There were 333,000 new single-family homes for sale last month, which is 1.2% fewer than a year ago. The NAHB reports that of that total, 76,000 are completed and ready to occupy.
The median sales price for a new home in March was $321,400, up from $310,600 a year ago.
“Buyers still in the market for a home might take a fresh look at new homes in the months ahead, especially if new-home prices soften,” realtor.com® Chief Economist Danielle Hale said in a statement.
New-home sales dropped in all four regions of the U.S. last month. New-home sales saw the steepest drops in the Northeast, down 41.5%, followed by a 38.5% drop in the West, an 8.1% decrease in the Midwest, and a 0.8% decrease in the South.
“The drop in March sales reflects buyer concerns over the virus, and was primarily concentrated in the hardest-hit regions of the Northeast and West,” says NAHB Chief Economist Robert Dietz.
Existing-home sales saw a much smaller decline last month. The National Association of REALTORS® reported this week that sales of existing homes dropped 8.5% from February to March and were down just 0.8% over a year ago. Further, the median price for previously owned homes was up in March to $280,600—an 8% annual rise. Read more: Despite a Dip in March, Home Sales Push Ahead
The three main credit reporting bureaus—Equifax, Experian, and TransUnion—have announced that everyone will be able to request a free credit report from each of them weekly over the next year. The new policy started this week.
The companies say the reports are being made more readily available to help Americans “protect their financial health during the sudden and unprecedented hardship caused by COVID-19.”
The CARES Act requires that companies report to credit bureaus whether consumers are current on their loans if they’ve sought relief from lenders due to the pandemic. Americans can monitor their credit reports every week to ensure that’s happening. About 3 million borrowers in the U.S. have initiated forbearance on their mortgages since March.
“Credit vigilance is critical during these uncertain times,” the companies wrote in a statement. “Consumers are advised to review their credit reports frequently to understand the information that is being reported about their payment behavior. … We are making credit reports more accessible more often so people can better manage their finances and take necessary steps to protect their credit standing.”
While existing-home sales dipped in March as the COVID-19 pandemic sparked stay-at-home restrictions across the country, they’re not far off from the numbers a year ago, and home prices continue to rise.
The National Association of REALTORS®’ monthly existing-home sales—which includes completed transactions for single-family homes, townhomes, condos, and co-ops—dropped 8.5% in March compared to February. Sales were at a seasonally adjusted annual rate of 5.27 million in March—down just 0.8% from a year ago.
All four major regions of the U.S. reported a dip in sales last month. The West saw the largest drop, down 13.6% in March compared to February.
“Unfortunately, we knew home sales would wane in March due to the coronavirus outbreak,” says Lawrence Yun, NAR’s chief economist. “More temporary interruptions to home sales should be expected in the next couple of months, though home prices will still likely rise.”
Home prices remain strong, even early in the pandemic. The median existing-home price for all housing types in March was $280,600, up 8% from a year ago. Also, home prices rose in every region of the U.S. last month.
REALTORS® are still finding ways to get sales done amid social distancing and stay-at-home measures aimed at slowing the spread of the coronavirus.
“We have seen an increase in virtual home tours, e-signings, and other innovative and secure methods that comply with social distancing directives,” says Vince Malta, NAR president. “I am confident that REALTORS® and brokerages will adapt, evolve, and fight, ensuring the real estate industry will be at the forefront of our nation’s upcoming economic recovery.”
Here is a closer look at additional housing indicators from NAR’s report, reflecting March housing data:
Housing inventory: Total housing inventory at the end of March totaled 1.50 million units, up 2.7% from February but down 10.2% from a year ago. Unsold inventory is at a 3.4-month supply at the current sales pace.
“Earlier in the year, we watched inventory gradually tick upward, but with the current quarantine recommendations in place, fewer sellers are listing homes, which will limit buyer choices,” Yun says. “Significantly more listings are needed and more will come on to the market once the economy steadily reopens.”
Days on the market: Properties stayed on the market an average of 29 days in March, down from 36 days in February and down from 36 days in March 2019. Fifty-two percent of homes sold in March were on the market for less than a month.
First-time buyers: First-time buyers comprised 34% of sales in March, up from 32% in February and from 33% a year ago. “Despite the social distancing restrictions, with many REALTORS® conducting virtual open home tours with mortgage rates on the decline, a number of first-time buyers were still able to purchase housing last month,” Yun says.
Investors: Individual investors or second-home buyers purchased 13% of homes in March, down from 17% in February and down from 18% a year ago. Investors tend to account for the biggest bulk of all-cash sales. All-cash sales comprised 19% of transactions in March, down from 21% a year ago.
Distressed sales: Foreclosures and short sales comprised 3% of sales in March, unchanged from a year ago.
Regional Breakdown
Here’s how existing-home sales fared across the country in March.
Midwest: Existing-home sales decreased 3.1% in March, reaching an annual rate of 1.25 million. Sales were down 4.2% from a year ago. Median price: $219,700, up 9.7% from a year ago.
Northeast: Existing-home sales dropped 7.1% in March. Sales were at an annual rate of 650,000, a 3% decrease from a year ago. Median price: $300,400, up 8.3% from March 2019.
South: Existing-home sales fell 9.1% to an annual rate of 2.29 million in March, up 0.9% from a year ago. Median price: $245,100, up 7.5% from a year ago.
West: Existing-home sales dropped 13.6% to an annual rate of 1.08 million in March, a 0.9% decline from a year ago. Median price: $420,600, up 8% from March 2019.
Listing data, detailed photos, and virtual and live-video tours will suffice for a growing number of consumers who are looking to buy a home; they don’t need to physically visit the property before making an offer, according to a new joint survey from realtor.com® and Toluna Insights.
Twenty-four percent of 1,300 consumers surveyed say they’d be willing to buy a home without seeing it in person, and 30% would be willing to rent one, the survey shows. Younger demographics appear to be the most comfortable using virtual tools in lieu of physical, in-person showings (29%). Further, 21% say that COVID-19 has made them more likely to move into a home sight unseen in the future.
The survey follows on the heels of findings this week from the National Association of REALTORS® that a quarter of REALTORS® and their clients have put a contract on a home without physically seeing the property. “Uncertainty around COVID-19 and limitations around social interactions and group gatherings, like open houses, have made buying and selling homes more difficult than ever,” says Nate Johnson, chief marketing officer at realtor.com®. “As real estate agents and consumers seek out ways to safely complete these transactions, we believe that technology will become an even more imperative part of how we search for, buy, and sell homes moving forward.”
Still, 47% of respondents say they prefer to see a home in person with a buyer’s agent before submitting an offer. But with social distancing guidelines in place, they are willing to adapt: 23% of that group say they prefer to go view the home alone, 13% prefer an online video tour, and 6% prefer their agent to show the home via video chat, the survey finds. Survey respondents indicate the following technology features are most helpful when deciding to buy a new home virtually:
A virtual tour of the home (61%).
Accurate and detailed listing information (58%).
Accurate and detailed neighborhood information (53%).
High-quality listing photos (51%).
The ability for the agent or landlord to show the property via video chat (39%).
Home builders started on fewer new homes in March as the COVID-19 pandemic spread across the nation. New construction was at a pace of 1.22 million units in March, the Commerce Department reported Thursday. However, that number is still 1.4% higher than a year ago.
Building permits—which help gauge future construction activity—were at a seasonally adjusted rate of 1.35 million in March, still 5% higher than last year’s rate. Nevertheless, a slowdown is inevitable, builders say, as COVID-19 takes an economic toll. The decrease in homebuilding activity represents a shift from the beginning of the year, when record-breaking permitting activity gave the indication that a building frenzy was likely in 2020.
“Housing has been deemed an essential business in most of the nation, and in the few states where the governors have not acted, we urge them to deem construction as essential,” says Dean Mon, chairman of the National Association of Home Builders. “Housing can help lead an eventual rebound, as it has done in previous recessions.”
About 534,000 single-family homes and 684,000 apartments are currently under construction. About 90% of these single-family homes are located in states where homebuilding has been deemed an “essential service,” while 80% of apartments are located in such states, says Robert Dietz, NAHB’s chief economist.
Mortgage rates dropped for the third consecutive week, inching closer to the lowest averages ever on record. “Refinance activity remains high, but home purchase demand is weak due to economic tightening,” says Sam Khater, Freddie Mac’s chief economist. “While new monthly economic data are driving markets lower this week, they are a lagging indicator and should be priced in already. Real-time daily economic activity metrics suggest that the economy will likely not decline much further. Going forward, the key question is no longer the depth of economic contraction but the duration.”
Freddie Mac reports the following averages with mortgage rates nationwide for the week ending April 16:
30-year fixed-rate mortgages: averaged 3.31%, with an average 0.7 point, falling from last week’s 3.33% average. Last year at this time, 30-year rates averaged 4.17%.
15-year fixed-rate mortgages: averaged 2.80%, with an average 0.7 point, rising from last week’s 2.77% average. A year ago, 15-year rates averaged 3.62%.
5-year hybrid adjustable-rate mortgages: averaged 3.34%, with an average 0.3 point, dropping from last week’s 3.40% average. A year ago, 5-year ARMs averaged 3.78%.
Average commitment rates are reported along with average fees and points to reflect the total upfront cost of obtaining the mortgage.
