May 1, 2020
Post COVID-19: What Real Estate Trends Will We See?
Flashback to early February 2020 – the stock market was at an all-time high, Real Estate Agents were preparing for the Spring Housing Rush, and the only thing on the news was the Presidential Primaries… (Aside from the one-off article you’d see about a novel sickness spreading through the Wuhan Province of China.) Then BAM– before anyone had time to prepare, we were hit by something that no one has experienced quite on this scale before.
No one could have possibly imagined the impact that this virus would have on our world. The mind-boggling fact of the matter is that this Pandemic has excluded no one on its path of destruction. Across the globe in a variety of industries, everyone’s lives have been changed extraordinarily. Entire economies have been placed on hold, nonessential businesses are closed or conducting business virtually, and lockdown orders are causing a majority of the world’s population to stay home.
In terms of Real Estate, most markets were on fire up until last month. In the Minneapolis area alone, average sales price of homes was up 4.7% in the month of February from 2019. The amount of pending sales was up 23.9% from February 2019. (Source: Minneapolis Area Association of Realtors) With the uncertainty and volatility that came along with this pandemic, the financial and real estate markets started to freeze in late February-early March, leading into what would have been a busy Spring Real Estate season.
Crisis educates individuals on learning resiliency, creativity and grittiness. It teaches us to find new and innovative ways of doing things, which is what we must do to dampen the impact that this pandemic has on our society and economy. While no one has a crystal ball, Real Estate experts agree that these trends are most likely to occur after the Coronavirus is over:
1. Low interest rates to nurse the industry back to health
As we saw in the month of March and April, mortgage rates were at an all-time low. We predict that this trend will continue for at least 1 year after this event has taken place. This would be to mitigate the long-term financial impact that this crisis will have on the Housing Market. According to Freddie Mac, after the 2008 recession the average mortgage rate plummeted from 6.03% in 2008 to 4.69% in 2010. In order to give the country time to recover, we predict that the government will keep low interest rates to promote buyer activity.
2. A continuation of virtual showings and real estate activities
Buying and selling a home from the comfort and safety of your own home has never been easier! With technology such as docusign, Zoom, and Facebook live, it is now more important than ever to use innovative technology to accommodate your clients’ needs. We predict that this trend of virtual business dealings will stick around after the Coronavirus Pandemic ends. An added benefit of this trend includes the ability for buyers to view multiple homes in a shorter period of time, which leads to quicker decisions being made (and less days on the market!).
3. Strong Fall season to replace the slow Spring rush
Just as Accountants have a busy tax season between January to April, the Real Estate industry typically sees a boom occur in the Springtime. This is increasingly evident in Minnesota! It could have something to do with those frigid winters, but once the snow melts home buyers and sellers are out and ready to make a move! With the uncertainty surrounding our economy and some individual’s job security, buyers and sellers have taken a step back from their typical Spring veracity. However, the good news is that those who were planning to buy or sell 2 months ago have merely shifted their timing down the line. Some sellers may hold off on listing their home until the economy is in favorable conditions once again. Due to these facts, we predict that the Spring busy Real Estate season will be shifted to the fall.
4. Focus on entertainment and office spaces in homes
Just a few months ago, entertainment and office spaces were just added amenities in homes. Due to country-wide lockdowns and shelter in place orders, families are spending more time together indoors now than ever before. With schools shut down until further notice, students are completing their classes and schoolwork virtually. Many working professionals are being told they need to work from home until the lockdown is over. With entire households completing their day-to-day activities from home, the need for spaces designated to such activities is imperative. Looking towards the future, many workplaces are predicted to extend their remote working policies. This would require employees to have the space to do so at home.
While the impacts of this pandemic have been startling, one thing we know after the 2008 recession is that the Real Estate market is resilient. Rather than focusing on the negative repercussions that will come from this crisis, we need to adapt and overcome the obstacles to get to the other side. While this is a time marked with uncertainty and anxiety, people are connecting with family and friends on a much deeper and more “present” level. Once the lockdowns have been lifted and societies are free to go about their normal activities, we will all be grateful for the simple things in life that give it substance. Safety and a sense of community are going to become increasingly critical in Americans’ lives after we get to the light at the end of the tunnel.