How is coronavirus impacting the lives of prospective buyers and sellers in the U.S.?
By Esha Deokar
Real Estate and Social Distancing
For many families, buying a house is an arduous process. You hire a realtor, set a price point, and start making rounds in neighborhoods to view as many open houses as you can. You may like a house on paper but once you step inside you may come to the realization that it is not right for you. The housing market heavily relies on these face-to-face interactions and interpersonal connections, which during this period of COVID-19 has been increasingly difficult to accomplish.
Some realtors, especially in hotspots of the virus, have a hard time selling because everyone is staying at home. In Miami, Jorge Guerra Jr., broker and chairman of the Miami Association of Realtors, said that the market is being disrupted both by the sellers and the buyers. He believes that there have been some noted dissolutions of sales. As unemployment climbs, the number of people willing to sell goes down. However, Guerra speaks optimistically on the $2-trillion dollar stimulus package that Congress signed as well as the loan payment deferment programs that some mortgage lenders are offering. Some realtors believe that much of the concern around the real estate market depends on how long the pandemic will last.
What’s Happening in the Market?
As recession looms, mortgage rates reach one of the lowest points in history. Economists from the Wall Street Journal want to offset the belief that the housing market can easily bounce back from such a stifled period of growth.
The graph above, which has been adjusted for seasonal changes, shows that the National Association of Realtors predicted a $0.2 million dollar increase in sales of previously owned homes by 2020. Later the association revised the prediction, saying that April would bring a 10% decrease in home sales. Since spring is such an important season for real estate, a sharp drop may affect the market in the long run.
Zillow & Redfin
Following reports made in early March, both Zillow and Redfin paused their iBuyer programs as a result of the pandemic. Redfin Now and Zillow Offers have been suspended indefinitely due to social distancing mandates, a government measure that has hit many industries hard.
The iBuyer side of these companies allows the business to buy homes from homeowners. Redfin CEO Glen Kelman is pausing RedfinNow due to a decrease in home buying demand. He stated that the traffic on the Redfin website has fallen over 20% since January. Furthermore, Zillow announced that they were also suspending home buying, specifically Zillow Offers. Rich Barton, CEO of Zillow, announced that they are not only suspending home buying features, but cutting expenses by 25% and freezing hiring across the company. Late March brought Zillow a 4-year low in their stock, which may have propagated some of Barton’s concerns.
Another challenge that this temporary suspension brings to the table concerns inventory matters. Both Zillow and Redfin have many homes in their inventory that they are unable to sell. By keeping the homes stuck in inventory, there is a large chance that they will garner small returns in the future. While Zillow and Redfin are in a less than desirable spot regarding their home inventories, families and consumers looking to sell their homes may take more of an advantage of this feature when it comes back online. The prospect of a recession may induce sellers to sell their properties as fast as possible.
Trying to postulate a viable economic future during the pandemic is difficult. Realtors do not know where their careers lie, and businesses have had to make hard adjustments to deal with the most recent news. On the real estate side, open houses will have to shut down for the time being, perhaps indefinitely. The disruption in the housing market parallels the length of time the country takes to handle the pandemic. Whether it will be a small bump or a sustained period of downturn is difficult to say, but looking at companies’ responses and the current numbers, the prediction more closely parallels the latter. □
- Image source
- Vazquez, Christina. (2020). Real Estate Market Feeling Impact of Coronavirus Pandemic. Local10. Retrieved from https://www.local10.com/news/local/2020/03/25/real-estate-market-feeling-impact-of-coronavirus-pandemic/
- Friedman, Nicole. (2020). Coronavirus Looms Over Crucial Spring Season from Housing Market. Wall Street Journal. Retrieved from https://www.wsj.com/articles/coronavirus-seen-slowing-crucial-spring-season-for-housing-market-coronavirus-looms-over-crucial-spring-season-for-housing-market-coronavirus-threatens-crucial-spring-season-for-housing-market-11583963949
- Dhaliwal, Shivdeep. (2020). Zillow, Redfin, Realogy and Opendoor Suspend iBuyer Home Purchase Programs Due to Pandemic. Yahoo Finance. Retrieved from https://finance.yahoo.com/news/zillow-redfin-realogy-opendoor-suspend-045712124.html
- Soper, Taylor. (2020). Rich Barton Lays Out Zillow’s Coronavirus Playbook: Freeze Hiring; Cut Expenses; Pause Home-Buying. GeekWire. Retrieved from https://www.geekwire.com/2020/rich-barton-lays-zillows-coronavirus-playbook-freeze-hiring-cut-expenses-pause-home-buying/
- Passy, Jacob. (2020). Zillow and Redfin Are Pausing Home-Buying. Could the Coronavirus Pandemic Make the iBuyer Model More Popular? MarketWatch. Retrieved from https://www.marketwatch.com/story/zillow-and-redfin-are-pausing-home-buying-could-the-coronavirus-pandemic-make-the-ibuyer-model-more-popular-2020-03-23
- Mishkin, Shaina. (2020). Zillow Is Pausing Home Purchases. What It Means for Real Estate. Barron’s. Retrieved from https://www.barrons.com/articles/zillow-is-pausing-home-purchases-what-it-means-for-real-estate-51585001847