Hi everyone, Shawn Shackelton with The Shackelton Group and I wanted to jump on and talk about what we see going on right now in the real estate market with regards to the coronavirus. In my last market update, we talked about how great the market was, our inventory shortage and the number of buyers that could not find homes to buy.
The Stock market has been jumping all over the place, this naturally brings fear and anxiety. The big difference between the stock market and the real estate market is that the real estate market does not react as quickly as the stock market; it has a much slower more gradual change over time, so we can make calculated decisions this I will be keeping a VERY close eye on to help answer your questions.
Michael Orr of The Cromford Report said this just this morning. “A number of people seem to assume that we are heading for a recession and that home prices will fall. The first assumption is quite reasonable. The second assumption is based on fear and has little analytical data to back it up.
Obviously anything can happen in an uncertain and disrupted world, but a fall in home prices is still looking very unlikely from today’s numbers.”
What we are seeing is sellers either deciding not to sell right now or temporarily taking their house off the market to wait and see what all of this will do to the real estate market.
We have not seen a significant buyer slowdown in Arizona yet. It will come at some point but we are still seeing a high buyer demand.
The reason our real estate market is still so hot is because we have had record low inventory since last year & with our normal “high season” beginning before the whole coronavirus thing started it has continued to remain low & is now dropping even further.
Because our inventory is and has been so low and our demand has been so high, the reduction of demand will likely not affect pricing that dramatically, at least not right now.
For those buyers that need to buy this could be the best time to do so. Interest rates are historically low and there will be less competition.
If you are worried about going out to look at homes, I have used FaceTime with my out of town clients multiple times and can do video tours through homes.
For sellers, with fewer homes on the market using the cutting edge marketing tools I have already been implementing, basically doing video walkthroughs of the home allows buyers to experience your home without walking through it, giving you some peace of mind in this crazy time.
We have a great tool in our market that analyzes many things one being supply & demand this tool is called the Cromford market index, a normal market is 100, we have been almost 200 for quite a while and we have not seen this change recently, again will this change? It is highly likely, by how much?
That’s the question, but remember what we talked about earlier… real estate prices don’t change overnight. This is something I will be watching every day so that we can continue to talk about it.
The last thing I wanted to talk about quickly is the Fed cutting the interest rate. Yes it was cut back to 0 however the Fed rate and the mortgage interest rate are like comparing apples and oranges. If you bought a home today and got a mortgage you would not have a 0% interest rate. If you have more questions about this I am happy to put you in touch with an experienced mortgage professional.
The coronavirus is a serious issue to pay attention to and it’s serious when this amount of people have been told to stay home and work remotely. I am grateful that so many people have followed this advice to help decrease the numbers of possible infections. I do know that we will get through this; I have been through multiple real estate market downturns and as always will stay on top of the data to share with you.
A few things to keep in mind during this time of uncertainty regarding real estate. In 2005 the housing industry started to sicken because homes were being used as speculative commodities, not for places to live.
In 2020, housing is an innocent bystander to a probable recession caused by a pandemic. It has supply at extremely low levels and most homeowners have a large amount of equity. Even if they lost all their income and could no longer pay their mortgage, they could quickly find a buyer to release that equity. There is little likelihood of them facing foreclosure because the lender can be paid off with the sale proceeds.
Only when demand collapses do the banks have to foreclose to get their money back. At the moment demand is still well above normal and has only shown very tiny signs of easing. In 2006 demand fell off a cliff yet home builders continued to build even more new homes because lenders continued to write ill-advised loans in huge numbers.
Michael Orr said just today: “There is no cause for panic and if you are delaying a purchase because you think the price will come down, you are probably making a poor decision.”
I hope this was helpful and as always if you have any questions or if I can help with anything don’t hesitate to reach out. I know this can be scary; we are all in this together.