05/06/2020
This is a newsletter dealing with the impact of the pandemic on the real estate market I sent to my clients today:
Dear friends and clients,
As you all know, since March, we live in a different world, and one that will probably stay with us for quite some time. Since I’m sure that some of you would like to know what is happening in real estate land now that we have entered the “Covid-19 era,” here is some information that you may find helpful and/or interesting.
First of all: what is happening to the real estate markets? The short answer is that there are still a lot of willing buyers and sellers out there, and that closings are still taking place all over the country.
However, there are now fewer buyers and sellers than a year ago, and the median sale price per square foot has dropped somewhat in Sarasota county. We started the new year with a bang: January and February of 2020 saw about 400 more contracts written than during the same period in 2019. Moreover, the Average Sale Price per SqFt rose from $200 to $223.
The numbers changed in early March, when it became evident that the coronavirus was going to be an issue: when we compare March and April of 2019 with March and April 2020, we see the effects: during 2019, 2872 contracts were written in our county, and the average Sale Price SqFt was $202. The same period in 2020 saw 1740 contracts written and the average Sale Price per SqFt had dropped to $194.
Interestingly enough, when we look at Orange County (Orlando area), we see that although the number of contracts written in March/April 2020 also suffered a big drop when compared to 2019, the average price per SqFt actually rose somewhat!
This goes to show again that all real estate is local, and that not all participants in the market see the covid-19 episode as a major disruptor of the real estate market.
One explanation for the discrepancy between Sarasota and Orange County may be the fact that the average age in Sarasota County is almost 20 years higher than in Orange County. It is still good news, though, since it shows that there is a pool of motivated buyers.
A lot has changed for us Realtors as well. Our offices are closed to the public, and office meetings take place via Zoom, MS Teams, or what have you. We can no longer hold open houses, and have to present our listings through virtual tours, walk-through tours, and some of us even hold virtual open houses. We discourage showings, unless the buyers are qualified, motivated, and ready to act. Before we show our listings, we ask that the buyer wears gloves and a facemask, and doesn’t touch anything inside the house. We have to follow the recommendations from the US Centers for Disease Control. There are a number of new covid-19 forms and addenda, and closings basically take place with as few people as possible (I’m not allowed to go to a closing, which is something I really loved to do). There are also cleaning companies that can disinfect a house before a buyer moves in, just to make sure.
So if you are interested in buying or selling real estate, you’re not an exception. It can be done, as long as all parties are on the same page and are serious about observing the CDC guidelines. Since this market cannot be compared to what happened during the financial crisis of 2006-2010, this is not the time for buyers to make extremely low offers, nor is it advisable for sellers to ask more than the market will bear. Financing has become a bit harder, since Fannie Mae and Freddie Mac have added underwriting regulations that make sure that prospective buyers are not at risk of losing their jobs as a result of the pandemic. Many lenders are also asking for a bigger down payment, and higher credit scores.
What will the future bring? My crystal ball is somewhat misty. It depends on all kinds of factors, which include a availability of an effective vaccine (hopefully some time in 2021), the general availability of covid-19 testing (still very inadequate), and whether we manage to really flatten the curve (which, unfortunately, has become a political issue, which is not helpful). It is unavoidable that some businesses will fail, unemployment will go up, and people will have to sell their homes (return of the short sale? I hope not). But the severity of these events all depend on the issues that I outlined above. The market has slowed down; time will tell if this is a temporary phenomenon, the result of many of us having a wait and see attitude (not surprising, since we have never experienced an event like this during our lifetime), and many people who are no longer able to buy real estate.
On the positive side are the facts that mortgage rates are at their lowest level ever, and that our Sarasota market attracts many retirees who often don’t even need a mortgage. Add to this the fact that there is a shortage of about 4 million homes in the US, and you see why not all is doom and gloom.
Please, feel free to contact me if you have any questions; I’ll be happy to help you as good as I can. Please, stay safe!
Warmest regards,
Paul Wolbers, PhD., Realtor
