How will this pandemic shape buyers and sellers? What will people do differently when it comes to real estate? Here are some things on my mind. What do you think? Please comment below.
Rural areas: I’ve heard data firms and colleagues talk about growing interest in rural areas, so this is something to watch to see if it pans out. The idea is people are craving more space, so they’ll embrace a country lifestyle.
Land: A friend the other day was talking about land on the outskirts of the region. Owning a couple acres for $20K is appealing in light of the idea of having more space. Here’s a list of thirty lots under $50K.
Family & Divorce: Some people may want to move closer to family while other households are going to be splitting due to divorce.
Buyers more sensitive about location & condition: For years buyers have been exhibiting sensitivity to adverse locations and homes that are not in pristine condition. In other words, buyers have higher expectations about what they are buying and they aren’t overlooking the true condition of a home or paying top dollar for junk. I expect going through a pandemic will only inflame this dynamic.
Accessory dwelling units: I’m guessing accessory dwelling units will be more useful and desirable for extra income as a rental, housing family members, helping friends who lost jobs, and working from home. Here are all sales in MLS over five years with a listed guest house (I may do a deeper post on this soon). Some of these properties of course had more of a pool house, but many do have a legit ADU / second-unit / apartment thingy.
Moving out of state: This pandemic may motivate people to finally make that move they’ve been talking about to a different county or state. I’ve heard some locals say things like, “I’m heading to Texas as soon as this ends.” And I imagine some Bay Area residents are declaring, “I’m going to Sacramento when this is over.” Migration has been a trend already, and we’ll see how it evolves.
Home office: We’ve all been having Zoom meetings and figuring out ways to work from home lately. I suspect many businesses will go back to normal, but some may adapt their model. Thus having dedicated space for working from home could prove to be more valuable over time. I don’t know that buyers at the moment are actually shopping with this in mind, but if we see a bigger change in business models this will be something that becomes more important.
Cash out at the top: Some people are concerned about the market changing directions, so we’ll see certain owners try to cash out at the top so to speak. I’m not saying we’re at the top of a price cycle. I’m only saying some people think the pandemic has pushed us or will push us into a new price cycle.
Downsize & Upsize: There are households in need of more space because they’ve learned their home is too small. In contrast, maybe it’s time for some to sell, buy a smaller home, and pocket cash (or invest in hand sanitizer and toilet paper).
Gardens: It seems like everyone and their Mom is either baking bread or starting a garden (except for my house). Thus I expect to see more gardens in coming time when visiting properties. The other day someone asked me if a one-acre parcel would now be more appealing because of all the extra space to start an urban farm. Well, in my mind most people are not looking to have a garden of that magnitude.
No effect at all: Let’s be real that lots of people will come out of this not doing anything differently.
Other: What else? I’d love to hear your take in the comments.
Okay, moving on.
FRESH STATS:
Like I said last week, buyers are starting to get more used to this market, and this week it looks like pending contracts are on pace again to outpace the previous week (we’ll know more in a few days).
RESOURCES:
New market video: Here’s a fresh market update. It’s 20 minutes and I talk about the future (NOT a prediction video). Check it out below or here.
SAR market event (free): On Monday May 4th at 10am I’m doing a free big market update with the Sacramento Association of Realtors. This will be about an hour and it’s for anyone (not just members). Register here.
Videos this week: I’ve been doing lots of video conversations lately. I figured I would post the recorded ones here in case anyone wants to listen.
4/22/2020 Conversation with Madison Chase Team
4/24/2020 Conversation with Rico Rivera
4/24/2020 Conversation with Jenica Williams
4/27/2020 Conversation with Kristin Cooper
Appraiser John Carlson GoFundMe: John is a well-known appraiser in Southern California and he is going through a difficult time as he was diagnosed with cancer and hospitalized. I invite you to pray for him and donate if you can. See more here.
I hope this was interesting or helpful. Thanks for being here.
Questions: How do you think quarantining will shape buyers and sellers? What else would you add to the list? What did I miss?
If you liked this post, subscribe by email (or RSS). Thanks for being here.
The actual construction and materials costs psf of a new build are only part of the expense, in addition to the cost of the land. There are building permits and fees and infrastructure costs, bringing water, sewer, electricity to the site to consider as well, which can be significant and vary depending on location.
Exactly. So the dream of buying a cheap vacant site isn’t likely going to play out without spending lots of money. However, not everyone who buys land will build. Some just want space for hunting, camping, recreation, space for a tiny home parked on the site, etc… I’m glad you mentioned this. Thanks Alice.
How has the pandemic shaped buyers? Buyers are in two camps. Realistic – buying now is as good as anytime. You can’t time the market and now when people are cautious is a great time because there is less competition. The other camp is in my opinion unrealistic – waiting because they think the market is suddenly going to go down and prices will be super cheap. I don’t think so. If prices decrease, it will be slow and everyone will see it as it slowly happens.
You can put sellers in two camps as well. Sellers know now is as good as anytime as any to sell as long as people are social distancing and following the rules. Or sellers who are waiting until this whole social distancing is over because they are elderly, at risk or cautious.
Strangely, I’ve had more people contacting me regarding selling and buying now than pre-virus, so I’m glad that my clients are not overly cautious, because life really does go on.
This is golden. Thank you Camelia. It’s funny because I’ve been talking so much about the psyche of buyers and sellers in most of my content, but when writing this post it didn’t even cross my mind to address. Ha. I’m so glad you mentioned something.
I’m encountering many buyers who are expecting to get the deal of a century. There is an idea that the market has already shifted into a new price cycle and that prices are screaming downward. But that’s just not the story stats as of now are telling us.
Good observations, Ryan! I see more people moving in with parents or family. I also see a lot of Airbnb homes on the market. I wonder if that will influence the demand side.
However, real estate is an asset and the FED is printing a lot of money. This makes me think that even if we have a pullback, eventually real estate should do better than cash. My two cents anyway.:)
Thanks Jana. I appreciate your take. We definitely need to watch Airbnb. Some of those units are surely going to either cash out of the market or turn into long-term rentals.
Great discussing Ryan. To add to the point about the home office, I agree more businesses will be open to working from home now that they have been forced to change and this might make buying a home further from work more acceptable. The suburban and rural real estate markets might benefit from this.
Excellent point Gary. I think that’s an outstanding connection. ON that note we could see builders focusing more heavily on an office area too in the floorplan.