coronavirus

A second wave of outbreak & the housing market

June 30, 2020 By Ryan Lundquist 23 Comments

What will happen to the housing market if we have a second wave of outbreak? Quite a few states are seeing an uptick in COVID-19 cases right now, so this is an important question to ask. This isn’t about politics or fear, but having conversation.

From V to W? The market has seen a “V” shape so far where we had a decline when the pandemic began and then we rebounded. Today I interview economist Ralph McLaughlin to talk about his concept of a Flying W. It sort of takes the “V” that we’ve already seen and talks about why we might see another “V”.

Market update: Here’s my latest market update where I unpack glowing stats from this past week and some things to keep in mind if we do see another outbreak. Watch below (or here).

Ryan: What is The Flying W?

Ralph: The “Flying W” is generally the shape of the housing market recovery that we’re forecasting at Haus, which essentially is a wavy one. You can think of it as really two “Vs” next to each other, where the initial drop in activity due to the pandemic is sharp and severe, followed by a rebound to near pre-pandemic levels, and then the process repeats itself until we’ve recovered sometime next year. We’re thinking the process will repeat itself for a second time for three reasons. First, we think the initial rebound is simply due to pent-up demand for home buying that would have otherwise occurred in March, April, and May but will simply be pushed to June, July, and August. But after that, we’re not expecting new demand to replace it at comparable levels, which will lead to another drop in activity. Second, and I think we’re seeing this already, is that the virus will make a comeback, which will lead to less demand for homebuying in the fall. Third, there’s a possibility that we’ll see a broader impact on housing demand (including rentals) if the federal unemployment insurance bonus runs out at the end of July.

Ryan: What sort of stats would you recommend following to know if a “W” shape was beginning to happen?

Ralph: The important thing to note here is that some indicators are likely to follow a W, while others might follow an additional path. We’re expecting employment growth, home sales, price growth, and housing starts to follow a “W’ pattern, whereas we’re forecasting refinance activity to be more waterfall shaped. Other indicators are likely to buck the trend. For example, if renters are hit harder than homeowners, then we could actually see an uptick in the homeownership rate.

Ryan: Do you have any advice for buyers and sellers as they consider a possible second wave of coronavirus?

Ralph: Sellers shouldn’t be too worried at this point. It appears in the aggregate, sellers freaked out more than buyers during the pandemic. We saw large decreases in inventory across the country. And though demand certainly fell, it didn’t fall as far as supply. So the result has been a surprisingly robust market in many markets across the country. I recently sold my home in Virginia and was pleasantly surprised to have multiple offers, so buyers shouldn’t be expecting to get massive, if any, discounts like they could 10 years ago.

Ryan: Any tips for the real estate community?

Ralph: Utilize technology. We’ve come a very long way over the past decade in how people search for, tour, finance, and close on homes. Those who can utilize technology will have a competitive advantage during a downturn and thus will be more resilient. Buyers are becoming savvier with narrowing down their search list using online search portals, agents are becoming more savvy with how they use tools to virtually show homes and hold open houses, lenders are findings ways to streamline document sharing and signing, and title companies utilize platforms that make closing more transparent and efficient. The more the real estate community can utilize these technologies, the more resilient it will be.

Ryan: Thanks Ralph. I appreciate your time today.

Closing Thoughts: I’m really careful about discussing the future, but today I wanted to talk with Ralph because I think we need to think through what might happen to the market with a second outbreak and plan ahead. In my mind the two big issues that could influence the market include people’s perception of safety and governmental regulations. If we go on lockdown again, for instance, that could be a huge factor in slowing down the real estate market. Would it be exactly the same thing we saw in late March? Nobody knows. For now though it’s fascinating to consider whether our “V” shape could turn into a “W”. Let’s keep watching…

Manage your mental health: One last note. I realize this is a stressful time for many (including myself), so my hope is that you would have a deep sense of peace no matter what happens. And if you’re getting triggered by so much virus talk, maybe tune out of social media. My sense is having peace is not going to happen by accident so we all need to figure out how to cultivate that. Know what I’m saying?

Thanks for being here.

Questions: How do you think a second outbreak might affect the housing market? Do you think we’re going to go on lockdown again? I’d love to hear your take.

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Are buyers & sellers getting used to the pandemic?

April 22, 2020 By Ryan Lundquist 8 Comments

Quarantine. Wearing masks. Social distancing. It’s so weird that these are regular things now. The world indeed has changed over the past month and so has the housing market. Let’s talk about some new developments.

FIVE WEEKS AGO: About five weeks ago the real estate market started to have a strong reaction to the coronavirus. I look to March 12th as our day of change as that’s when things started to kick into high gear with events cancelling and sellers and buyers backing off the market.

OBSERVATIONS RIGHT NOW:

1) Pendings and listings declined heavily for a few weeks.
2) Pending contracts have begun to increase again.
3) More new listings are hitting the market.

Here’s a closer look at the numbers. These are single family detached homes without condos. I don’t include condos because they’re a different market that can water down the data. If you include them in your numbers, that’s cool.

Here is a look at new listings. There has not been a dramatic uptick, but we are seeing more new listings compared to a month ago (the first week we had sheltering in place).

SOME CLOSING THOUGHTS:

1) Goodbye cliches, hello experts: In a market like today it forces us to place our cliches, canned statements, predictions, and positive or doomy narratives aside. We simply must look to the numbers to understand the market. When trends change it creates opportunities for experts to arise. It also creates opportunity for credibility to be destroyed by making predictions that don’t come true and getting swept up in every single sensational headline.

2) Other markets too: This dynamic of the market seeming to hit a bottom a few weeks ago is something that is happening in some other areas across the country too as reported by Mike DelPrete in his email yesterday (a must follow). I’ll talk about this more in my weekly video at the end of this week. Please know I’m not saying prices or other metrics have bottomed out. I’m only saying it looks like listings and pendings (for now) have begun to increase again.

3) The future: We still don’t know the future, so I’d exercise caution in saying definitively the market has begun a recovery or rebound and will move forward from this point onward. We need time to see how everything shakes out and we’re still living in the midst of so many unknown factors that could sway the market in many ways. The reality is what we say about the market could be different next week based on new data.

4) Getting used to the pandemic: For now it looks like buyers and sellers have started to get a little more used to this pandemic market, which is evidenced by more pending contracts and an increase of listings lately. It’s possible some of this could be attributed to real estate agents being deemed essential too. Will this continue? Is this a trend we’ll see more in coming weeks? To be determined.

GRAPHS: I plan to make a tutorial soon on how to make a few of the graphs I’ve been posting. Appraiser colleagues, I haven’t forgotten.

I hope this was helpful.

Okay, moving on:

RESOURCES:

New market video: Here is a fresh market update video. This is 25 minutes and perfect for the background while working. Check it out below or here.

Interview with The Appraiser Coach: I did an interview with Dustin Harris to talk about not waiting for sales to see pandemic data. Watch below (or here).

Interview with Brad: I did a Facebook Live Q&A with Brad L’Engle last week to talk shop. Enjoy here if you wish (you don’t need Facebook to watch).

I hope this was interesting or helpful. Thanks for being here.

Questions: What do you make of the stats above? What are you hearing in escrows from buyers and sellers? If you’re not local, what are you seeing happen in your market?

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Hot real estate stats during the pandemic?

April 2, 2020 By Ryan Lundquist 31 Comments

I can see the headlines now. “Prices rose despite the coronavirus,” or “The housing market shows strength in March despite the pandemic.” But let’s step back and think critically about glowing stats from March and what they really tell us. I hope this will be helpful. Any thoughts?

Five things to consider about stats during the pandemic:

1) Prices rose last month (technically): If we’re not careful the hot headline can be the median price rose 3.5% last month in the Sacramento region despite the pandemic. In other words, the median price increased from $425,000 in February to $440,000 in March. On paper it looks like the market is fine and moving along without any effect. BUT we have to remember prices in March actually reflect pending contracts from mostly January and February. So sales in March actually tell us way more about previous months rather than March itself. If you don’t believe me, only 2.9% of all sales in March got into contract on or after March 12th (the day we found out Tom Hanks had coronavirus) and only fifteen properties have gotten into contract and closed since the lockdown went into place. So we have very little pandemic data to consider within March sales.

2) Pulling stats too soon: This sounds geeky, but it’s key to understand. Pulling sales stats on the first of the month is way too early because not all sales have been entered into MLS yet. In my experience on the first of the month we’re still missing about ten percent of the sales from March because not all sales have been entered into the system yet. So if we wait about a week instead to pull stats we end up getting a much more accurate picture. I quoted the median price above at $440,000, but that is preliminary and it could easily change based on ten percent of the market not being accounted for yet.

3) What to watch right now: If you want to see the current market, watch what is happening in the listings and pendings rather than recent sales in March. Are listings moving or sitting? Are we seeing more price reductions? Are properties spending less or more time on the market? What is the sentiment among buyers and sellers? Who is gaining or losing power? Has there been a change to the number of listings and pendings? Do sellers have to give more credits to buyers? Are contracts getting bid up? Are contracts falling apart more often? We need to ask these questions in every neighborhood and price range. My advice? Look to neighborhood stats and let the numbers inform your narrative about what is happening in the market.

4) Be objective about data: I find it’s so critical to be objective about prices. What I’m saying is if we’re not careful we can judge a market’s price direction based on what we think should be happening, recent sensational headlines, or even regional trends for pending contracts rather than looking to actual stats in a neighborhood or price range. Appraisers even need to do this. It can be tempting to say prices are declining, but we need to be sure that is the case based on what we are observing in the neighborhood market. Remember, it’s possible to be see pendings and listings start to slough, but that doesn’t always mean we’re seeing price declines at the moment. Could that be coming soon? Yes. But we need to let the data tell the story. Let’s remember the market is changing quickly, so what we’re saying today might be different tomorrow.

5) Upping your numbers game: If you work in real estate I can’t emphasize enough how important it is to be fluent in market trends and to be able to talk through current dynamics so you can offer informed real estate advice. If it’s helpful, I am posting a few YouTube videos each week right now as well as lots of content on Facebook and Twitter. Or let’s set up a Zoom meeting with your office so we can talk shop (local offices are free). My goal is to offer perspective and objectively share the story of the market without sensationalism.

A few closing things:

New market update video: Here is a new market update video from two days ago. This is 15 minutes. Watch below or here. I have some new stuff to share, so be on the lookout hopefully today.

Fresh daily visuals: During this pandemic I’ve upped my stats game and I’m finding new ways to visualize how the market is moving. I’m not focusing on prices for now because we don’t have enough data yet.

Side note for appraisers: There are disclaimers being put into appraisal reports that talk about not being able to quantify the long-term or short-term effect of coronavirus, but if we pay close attention we likely have enough data right now to at least talk about some of the short-term dynamics. It’s easy to put boilerplate pandemic comments in an addendum for liability and that’s a really good idea, but what’s even better is our market analysis. Colleagues, would it help to have some tutorials for these types of graphs so you can make them in your market? If there is enough interest I’d be glad to put something together. Let me know.

I hope this was interesting or helpful. Thanks for being here.

Questions: What stood out to you about this post? What are you seeing out there in the market right now?

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Working with appraisers during a pandemic

March 26, 2020 By Ryan Lundquist 28 Comments

Are appraisers still working? This is probably the question I’ve had most over the past week, so I wanted to unpack some thoughts.

1) Yes & No: Most appraisers are working and it seems like the bulk of appraisers working for lenders are still walking through the interior. There are definitely some appraisers who are not inspecting the interior though (myself included). Some sources say appraisers are deemed an “essential” service during the pandemic, though not everyone agrees.

2) Exterior focus announced: Fannie Mae and various banks have announced a temporary emphasis on exterior-only and desktop appraisals. When hearing this it’s easy to think every future appraisal is going to be a “drive-by”, but that’s not the case. In fact, traditional appraisals are still going to be in play for various types of loans and my guess is they’ll be the product of choice as long as they’re available. There is lots of conversation too about appraisers technically focusing on the outside but also getting information about the inside of the home through photos and video. Here is a table Fannie Mae published on Monday show what is possible, but we’ll have to wait and see how it all unfolds in the local market.

Keep in mind the lender sets the tone here and it’s not up to the appraiser to decide whether to do an exterior-only appraisal or not. However, an appraiser needs to believe a credible value can happen with a more limited scope of work, so appraisers won’t blindly say YES to an exterior-only appraisal if there’s not enough information. Lastly, just because a lender or AMC asks an appraiser to do something doesn’t mean the appraiser has to say yes.

3) Time: It’s going to take some time to see how this all shakes out. We’ll know much more in coming weeks. For instance, we haven’t heard from FHA yet.

4) Practical tips for real estate agents: It might help to take extra photos or video of a home before you list just in case it comes in handy for the appraiser. You might also consider being ready to talk with the appraiser about things such as layout, interior charm, age of improvements, quality of finish work, or anything you might understand more fully by actually walking through a home. If an appraiser is doing a desktop appraisal, I’m not certain the appraiser will call you or not, so you may want to include extra details in your MLS descriptions. This of course isn’t anything new because sharing property details is useful in any market. Please consider using my Appraiser Info Sheet to help tell the story of the property.

5) Private appraisals: If you are looking for a private appraisal, I can’t recommend enough being willing to color outside the lines. Would it be ideal to have the appraiser observe the interior in person? Yes. But during this pandemic it’s important to work with what we have and keep everyone safe. I have private clients who are working with me to use FaceTime to walk through a property (or the Google Duo app for an Android). I also have clients who have sent me 50+ photos of the interior and a very detailed written or verbal description of the property. Of course some appraisals for complex properties or geared toward court might need to wait.

6) Questions for appraisers: I’m not trying to ruffle feathers, but I think we’re at a place where it’s critical for appraisers to strongly consider whether they should be going into occupied homes. I have the utmost respect for peers, and that’s why I want to bring this up. So I ask, where is the line for us? At what point would you personally begin to pull back? How bad would it have to get? When is it deemed too risky for you and others? If you aren’t visiting your friends and family right now out of precaution, is it okay to go into homes of other people’s friends and family? I realize these questions are direct and there is also a cost to saying NO, but we have a serious situation going on right now. I have definitely lost business lately in light of saying NO to private clients, but that’s okay for this season. I don’t mention this to be combative and I hope to not be fielding angry emails all day. I love my peers and I’m concerned that we’re being asked to go inside homes right now. My strong opinion is we need to stop inspecting the interior of occupied homes. But put more lightly I’d say I think we’re at a place where appraisers need to show resistance to lenders for the sake of public health. Lastly, I realize not all areas of the country are the same in terms of COVID-19 cases (just in case you were ready to destroy me).

A few closing things.

Zoom session: If you want some background noise while quarantining, here’s a Zoom session I did yesterday hosted by KW Elk Grove. We talked about market stats, trends, and then fielded questions. It seemed like most questions were about how to see the current market and choosing comps. This is 100% off the cuff. Enjoy if you wish. Watch below or here.

New market update video: Here is a new market update video from two days ago. This is 20 minutes. Watch below or here.

Fresh daily visuals: During this pandemic I’ve upped my stats game and I’m finding new ways to visualize how the market is moving. Here are four images I’m updating every single day. If you have ideas for images too, I’m open ears. Remember, it’s tempting to focus on prices, but we see change happen first in the listings and pendings.

I hope this was interesting or helpful. Thanks for being here.

Questions: If you work in real estate, what types of appraisals are you seeing happen? If you are an appraiser, what’s your take on interior inspections?

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