Real Estate Matters: How will coronavirus impact the real estate market?
We're only getting one question this week although it comes in many forms: How will the coronavirus, COVID-19, impact the real estate market?
At this point, buyers are still buying homes and sellers are still selling. Sam has received several contracts in the last few days, although his office phone isn't ringing as much as normal. Ilyce has been talking to would-be sellers and buyers (and getting plenty of email) suggesting that people want to buy or sell, but they're nervous. So are brokers, title companies, and everyone else involved in real estate transactions.
And when the real estate market gets nervous, everything slows down. A lot.
What's happening now? The Department of Housing and Urban Development (HUD) announced this week that the Federal Housing Administration (FHA) has been authorized to implement an immediate foreclosure and eviction moratorium for single-family homeowners with FHA-insured mortgages for the next 60 days. The hope is that the world will be a little less chaotic, and if not, then HUD has 60 days to make some new rules.
Settlement agents, closing agents and title companies are all working hard to get the closings/settlements that were already underway completed. They are limiting the number of people that are at closing in order to comply with new COVID-19 guidelines from the federal government and the World Health Organization (WHO).
Normally, buyers, sellers, their real estate agents and, in states where attorneys are used in residential or commercial real estate closings, real estate attorneys meet at closing; so, the closing table can get pretty crowded. New guidelines indicate that sellers and their agents and attorneys should take a pass and sign closing documents by electronic signature. The settlement agent and other parties will probably (hopefully!) wipe down surfaces, limit all contact between people, use disposable pens and even limit the paperwork exchange.
What about would-be sellers? Agents are, for now, taking listings, but open houses are (or should be) off the table. Sellers don't want strangers trekking through their homes, touching surfaces and possibly spreading germs. Agents are trying to reassure sellers that they will only bring through qualified buyers, instructing them not to touch anything, and escorting them the entire time they are in the home.
Buyers are plenty nervous too. Those that left assets in what was, until a few short weeks ago, a high-flying stock market, may wind up with a lot less cash to use to buy homes. While interest rates are now at rock-bottom lows, that may not make up the difference. Sales will slow. Prices will come down, as the economy quickly flips to from a strong seller's market to a buyer's market.
How much will the market slow? The National Association of Realtors suggested a 10% reduction in sales for 2020. We think the true number could be a lot higher, depending on how fast unemployment skyrockets and how quickly people find new jobs (if indeed they do).
We also see technology taking an even bigger role. We expect that electronic signing of documents will become more widespread. Paper copies may become a thing of the past as copies of loan documents are now legally required to be sent to the buyer by electronic means in advance of the closing. We expect more closings will be done remotely, especially where documents are signed in advance, electronically in some cases.