What you need to know about Real Estate in the COVID19 crisis (Also, where is Sandra Bullock?)
As you may know, most states have issued business closures, recommended quarantines, school closures, etc. It seems likely that a shelter in place order will be imminent, which I've heard from several sources. In Pennsylvania, at least, brokerage offices are closed. But one of the benefits of this career is the ability to work from home, which many of us do a majority of the time anyway. So how does this impact the Real Estate market?
You probably already known from your own lives that this feels like a very weird blip in the space-time continuum. Personally, I don't have enough toilet paper for my family to last the next week. My daughter is actually interested in Star Wars. My husband shaved his beard for the first timed in 13 years. And I'm looking around corners for Sandra Bullock, because in an apocalyptic/pandemic situation, I'm following her!
But in a time where people are forced to telecommute, are losing money from being unable to work, are having to homeschool or care for their kids during the weekdays, and are generally afraid and/or uncertain of what might happen in the next few weeks, the decision to move, purchase or sell a home is the last thing on anyone's mind.
1. Real estate is a very personal business. You need to build the personal relationships. In this environment, open houses and in-person meetings are out of the question. Realtors are being creative and doing drive-by showings, virtual showings, video tours and open houses, etc. This is a great method for connecting with existing clients, but let's face it, the number of new clients looking at the market during this time are dwindling.
2. With the closure of businesses, certain real estate related businesses are still considered essential. It is possible to find companies to offer settlements in person, but is that really wise? Most things can be done virtually, as electronic signatures are counted with equal weight to pen and ink signatures. There is a new COVID-19 Addendum to the Agreement of Sale that can be used to modify the terms of the sales agreement in the event third-party services become unavailable or so limited that meeting deadlines in the sales agreement are impossible or impractical.
3. The Federal Reserve has cut interest rates twice in this month already, but it's worth noting that 30-year conventional mortgage rates have significantly increased in the last week. This is because banks are responding to the demand and significant movement within the real estate sphere. So what does this mean for you? Mortgage rates are still relatively low compared to recent years (approximately 3.6%), but if you qualify for FHA, VA or other federal rate mortgages, you will find that you could be able to afford more house or save some money for some renovations on your dream home!
4. The biggest concern for most is what the state of the economy will look like when this passes. An individual I know who has been in banking for over 30 years told me that they believe any damage done by this event will likely be resolved within a few months of the end of the crisis. My personal hope is that the government will respond as it has done in the past, and assist citizens with a stimulus as is currently being discussed. That said, the stimulus is a small band-aid for many, but if history is any indication, markets will hopefully pick up quickly once this is passed.