Newly constructed single family homes are shown for sale in Encinitas, California, July 31, 2019.
Mike Blake | Reuters
With more than 92,000 coronavirus cases and at least 1,380 deaths in the U.S. that have been linked to COVID-19, the U.S. currently has the most reported cases of coronavirus across the globe, putting life on hold for millions of Americans. This, as U.S. jobless claims surged to 3.283 million Thursday.
Not surprisingly, among the latest sectors that has now ground to a screeching halt: real estate.
According to a flash survey on March 16 and 17 by the National Association of Realtors, Realtors across the country are canceling their open houses and half of all agents reported a drop in buyer interest. That percentage tripled in just a week. Today that percentage is almost certainly much higher.
The survey polled a random sample of 72,734 members on March 16 and 17. For 96% of respondents, the majority of their business is residential. Seventy-seven percent of respondents are in a state that has declared a state of emergency. Fifty-six percent of members work in a local market where there are presumed or confirmed cases of COVID-19.
‘People do not buy when they are fearful’
Aaron Kirman, superstar real estate agent and host of CNBC’s “Listing Impossible,” thinks this pandemic could devastate the real estate market. “Real estate is a mentality, and people do not buy when they are fearful. … The longer this lasts, the worse it will be,” Kirman said in an interview with CNBC.
Buying or selling a house has become vastly more complicated, according to Kirman, who has seen a decline in house viewings since California issued a statewide ‘stay at home‘ on March 19.
If you are looking to buy a home right now, Kirman says to be prepared for a lengthy process. “We are almost at a standstill,” says Kirman. Many state’s stay-at-home orders allow only for essential businesses to operate during the pandemic. The real estate industry and many businesses that support it, such as home appraisers and building suppliers, have been deemed nonessential. Appraisals are down by about 80%, according to Kirman.
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Kirman also warns that some buyers and sellers should expect to renegotiate offers. “Some closings have happened, but they were 90 days old. I’ve seen offers on the table renegotiated for 20 to 30%.”
While technology, like videoconferencing platform Zoom and delivery apps are having a moment in the sun right now, Kirman doesn’t believe tech can boost the real estate market. “Buyers are bored looking online. I don’t think tech will sell a house via Zoom, but I hope I am wrong.”
Mortgage rates are volatile right now. The Federal Reserve lowered its interest rate twice in 2020. While this caused interest rates on credit cards and savings accounts to decrease, it did not have the same effect on mortgage rates. “The situation we’re in now is unprecedented, and rates are constantly changing due to the volatile market. Though rates are increasing today, they could decrease tomorrow,” says Beatrice de Jong, a consumer trends expert at Opendoor.
Total mortgage application volume fell by 29.4% last week, according to the Mortgage Bankers Association’s seasonally adjusted index. Despite this, Kirman has seen an uptick this week in applications. Kirman noted that mortgage applications are usually correlated to consumers’ confidence in the markets.
While the lasting effect of the coronavirus pandemic is still unknown, Kirman believes that when the pandemic eventually comes to an end, it’s going to be a buyers’ market, claiming, “The gains from the past 13 years will be wiped out.
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Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.