Almost every industry is affected by COVID-19, the resulting quarantine and the new regulations and restrictions that have been placed on our everyday lives.
The real estate industry is no exception.
The March data, which is the most recent available, actually hasn’t reflected the true impacts of the market restrictions that actually started to take effect midway through March, according to industry experts.
“March closed escrows reflected sales activity that occurred mainly in January and February with closed escrows most likely not severely impacted by the mid-month order that shut down all nonessential businesses and implemented social distancing rules,” said Nancy Troxell Carnahan, president of the 10,600-member Southland Regional Association of Realtors. “The heaviest impact on residential real estate of the stay-at-home order will be reflected in statistics reporting April and subsequent months.”
In fact, the industry insiders expect to see the beginning of these impacts become steep in the coming months.
“We’ll see steep drop-offs in sales totals in the coming months as the region fights to contain the pandemic,” said Tim Johnson, the association’s CEO. “Realtors are adapting to virtual sales activity and implementing safe practices and social distancing, as they work with the buyers and sellers who still want to proceed with a real estate transaction.”
Every office is instituting its own restrictions to keep buyers, sellers, agents, stagers and more safe, following the state’s stay-at-home order.
And while the entire industry is feeling effects to some degree, one thing SCV Realtors agreed on is that while there might be some impacts, the area is fairly well-positioned to weather the storm and, barring any dramatic worsening of the pandemic, should bounce back quickly — even as far as soon as the end of summer.
The slow-down
While the SCV is expected to recover due to factors like its supply, desirability and the overall value, the restrictions couldn’t come at a worse time, because the market tends to see a lot of sales from the end of spring through the summer.
Craig Martin, a Realtor for Realty ONE Group in Santa Clarita, said his agency usually sells about half of its homes in May through July, which is common to most Realtors as most people move during the summer — due to summer break, among other reasons.
“A lot of the inventory would have stepped up this time of year — a lot of the problem is with COVID-19, people don’t want to show their homes,” Martin said.
Those who are buying now are motivated purchasers, and there aren’t a lot of homes on the market — the SCV has 1.4-month supply, whereas a healthy market is typically seen as five- to nine-month supply — the SCV situation was a little atypical even before agents had to create a new normal.
“We have sellers that need to sell and we have buyers that want to buy,” said Erika Kauzlarich-Bird, a former president of the SCV chapter of the SRAR and manager for a RE/MAX Grand brokerage office. “For some, the pandemic has not stopped them.”
It has, however, changed how Realtors are working to accommodate buyers who have a countless number of questions but often in the past few weeks, less access to the homes they’re looking at buying in a number of ways.
Agents are asking sellers to do things that aren’t typical, like having them give buyers a video walk-through of their homes and, in order to access potential homes, Realtors are often asking buyers to show they’re ready to give a serious offer — since open houses wouldn’t be allowed even if sellers were willing to have strangers walk through their homes, Bird said. She added in instances when the homes are shown in person, both buyer and seller have to also sign an acknowledgement of the risks involved.
Moving forward
The overall market doesn’t provide a crystal ball for when the recovery will begin, but local agents are pretty confident that it’ll happen sooner than later — if the restrictions begin to gradually ease as expected, during the summer.
“Right now, you’re getting the house for pretty much what it’s priced,” Martin said. “People think, ‘Oh the markets are going to go down’ — I don’t believe that. You might get a little bit of a better deal … ” he said, acknowledging that a motivated seller might be more willing to make a concession in these conditions.
The coronavirus pandemic probably hit pending escrows — a measure of future activity — the hardest, according to an April statement by the SRAR. The association reported 444 open escrows at the end of March. That number represents a 34.2% drop from the March 2019 data.
And while interest rates are very low right now, there’s a great deal of uncertainty, which also never helps inspire buyer confidence.
“Obviously with this pandemic, it’s roughed (the market) up a little bit and we don’t know where we’re going. We don’t know how bad it’s going to get,” Martin said, then added, “but It look like we’re kind of there right now.”
While there might be money available for qualified buyers, another complication has been the furloughs and changes in employment status that for some can change the nature of their position from week to week — even for cases like film industry positions and other positions highly likely to resume once the quarantine ends. Banks check on that status regularly, and although Martin said he’s sold seven homes in the last two weeks, he’s also seen multiple deals have to be changed or scrapped altogether after the financing fell apart due to temporary employment changes.
“Buyers are getting everything all in place. Once the orders are lessened and less restricted and buyers have a confidence in terms of safety and getting out there and that their jobs are still secure, then those buyers are going to need to buy something,” Martin said. “Those multiple offers aren’t going away, there’s just a level of uncertainty.” ν
