UPDATED 06-03-2020.
There's a lot of positive real estate news out there but the fact remains that Sold volume for single family homes has significantly declined in March, April and now May. The reason prices have not declined is because fewer sellers are listing their homes for sale. Price is being supported by supply and demand.
Common sense will tell you that the coronavirus will cause real estate buyer demand to fall off, even if only on a temporary basis. The same will be true for all markets during the outbreak stages of this virus. Southwest Florida Real Estate has been in strong demand since the end of the last recession.
- HOME SALES DATA APRIL 2020 YEAR OVER YEAR
- REAL ESTATE SALES AND THE CORONAVIRUS NEWS CYCLE
- DISRUPTION
- CAN RECENTLY UNEMPLOYED GET A MORTGAGE?
- OPEN HOUSE DURING VIRUS (VIDEO)
- WHAT TO EXPECT WHEN SELLING YOUR HOUSE
DURING THE CORONAVIRUS
OUTBREAK - STOCK MARKET EFFECT ON BUYING A HOUSE
- SALES PRICES DECLINING IN OTHER STATES EFFECTING FLORIDA
- SELF IMPOSED TRAVEL RESTRICTIONS
- SERIOUS BUYERS DURING A MARKET DISRUPTION
- WHAT TO DO IF YOU WANT TO SELL NOW
- SELLING DURING ANY MARKET DISRUPTION
- SELLING YOUR HOME DURING A DOWNTURN
- TRADITIONAL MARKETING DURING A DOWNTURN
- OPEN HOUSES - DON'T DO THEM!
- SERIOUS BUYERS DON'T WAIT FOR OPEN HOUSES
- RANDOM OPEN HOUSE ATTENDEES ARE OFTEN NOT QUALIFIED
- SHOULD YOU BUY OR SELL NOW?
- HOW A REAL ESTATE DOWNTURN WILL DEVELOP
REAL ESTATE SALES AND THE NEWS CYCLE:
From what we all hear on the news, the virus is acting a bit like early winds in a pending category 5 hurricane. As of today, the number of infected people has doubled every couple of days, and that’s without widespread testing. Fewer buyers will be out and about looking at your property.
If the virus is less severe than what we’re hearing, the effect on real estate might be short lived. For now, you can expect the number of buyers looking at your property will dwindle.
Here's the update one month later. Data shows that the SOLD VOLUME has dropped double digit with the most common drop by city being 33%.
CLICK CHART:
DISRUPTION:
If sales volume continues to drop, Home sales prices will fall. Right now (early May), prices have held. The National Association of Realtors has lobbied the government for emergency aid measures in the event of a downturn. The last time they did that, we lived through the prior recession. While this will be different and probably short lived, you should anticipate pricing pressures. You’re going to need a better online presence and you will need to have your property marketed in channels outside of the normal MLS distribution (but including the MLS).
One house that a buyer is watching dropped their price from $360,000 to $339,000 (5.83% drop). That's a $21,000 price drop that appears to be directly related to the coronavirus and this seller's attempt to get ahead of the market.
CAN RECENTLY UNEMPLOYED GET A MORTGAGE?:
While the fed has eliminated the cost for banks to borrow, and wants liquidity, banks will still have criteria to follow. Many would be buyers are now out of work (hopefully very temporary). Even if a buyer wants to move forward with a contract to buy your house, they may not be approved for a mortgage.
WHAT TO EXPECT WHEN SELLING DURING A MARKET DISRUPTION:
You can expect less buyer activity. If the coronavirus lasts longer than expected, you’ll start to see more sellers willing to accept a lower price. Many areas of SWFL are in a seller’s market but that can change fast with the current disruption.
If the coronavirus is short lived, downward pressure on home prices should be minimal and prices will recover quickly.
STOCK MARKET GAINS AND REAL ESTATE:
People are looking at their stock investments and are feeling the pain. Price gains in the stock market have been one of the comfort factors that gave confidence to many buyers.
Even with many experts saying that the markets will shoot back to record highs as soon as this virus situation is under control, it might take a while for cash flow to get back on its feet, and more importantly, the hesitation to buy may last months after the virus has passed.
SALES PRICES DECLINING IN OTHER STATES EFFECTS FLORIDA PRICES
Some States were already seeing price declines for certain categories of home sales. If more house hunters are sidelined because of virus fears, many sellers will decide to wait for a better opportunity to sell. Those sellers are potential Florida buyers.
Some northern locations are in a buyer’s market (causes downward pressure on price.) The coronavirus adds more uncertainty for buyers.
TRAVEL – SELF IMPOSED RESTRICTIONS:
If the coronavirus gets as bad as the news keeps stating, many potential buyers will put off traveling to Florida to look at homes. These same people will travel here at a later date but for short term purposes, this reduces the number of buyers searching in your area.
SERIOUS BUYERS DURING A MARKET DISRUPTIONS:
Anyone looking at homes during a virus epidemic are likely serious buyers. They may need to move now and in certain circumtances, they may buy remotely.
WHAT TO DO IF YOU’RE READY TO SELL NOW:
For starters, you’ll need to have more than a simple MLS listing, and you’ll need a creative approach. More on getting creative later. If the virus causes a buyer's market in Southwest Flroida, traditional marketing is probably not going to be enough for sellers who want to aviod being on the market for year.
Even in a good market, many homes fail to sell using traditional marketing. During the past recession, up to 48% of homes failed to sell within reasonable timelines. When they did sell, it was common for the seller to take a loss.
IF YOU WANT TO SELL DURING ANY MARKET DISRUPTION, YOU NEED YOUR OWN ONLINE PRESENCE:
If you visit any online search site including broker sites, many distractions exist to pull your potential buyer away from your house. You need a website devoted to selling your house, along with a marketing plan that attracts more buyers to view your property online without the distractions that exist in multi-property search sites.
Buyers will still look at large search sites, but when they end out on a site devoted to your house, they won’t be pulled away with distractions. They can concentrate on your house. Here’s one of our new sites created for this purpose: BuyHomeInfo.com
With the coronavirus disruption, serious ready buyers are going to see less homes in person. Ready buyers will still want to do in person visits to several contender properties before they make final decision but most will be more selective for their in person visits.
SELLING YOUR HOME IN A DOWNTURN:
I accidentally got involved in real estate during the middle of the recession. I was having a drink with a friend who had at that point been a broker for 18 years. He was complaining that he had listings that weren’t selling and essentially, he was thinking of leaving the industry. This was a very common scenario. The majority of agents left the industry during the recession when it got difficult to sell using traditional methods.
From my perspective, I thought the bigger issue was the lack of creativity that is common with the traditional marketing approach. I had successfully marketed a service in a highly competitive field using a different approach. I offered to test my marketing skills by helping my friend attract buyers (not for free!) The short story is that my approach did in fact attract the right buyers and improve his sales. (As it turned out, he was tired of the real estate business and left two years later anyway.)
When I moved to Florida I handled behind the scenes marketing for failed to sell properties and had a 100% success rate during the recession.
One seller had been on the market for years and went through agent after agent. One of the Brokers I did work for took the listing. My efforts produced 3 offers within 3-months as well as two waiting in the wings. This was accomplished without lowering the asking price.
That’s the short story. From experience I can say, if the market turns, then using the traditional approach to sell your home will have you sitting on the market for a long time wondering if you’ll ever find a buyer or you'll sell to a flipper and take a loss instead of maximizing your price. The coronavirus has the potential to crimp this market.
The underlying economy has been strong in recent years so the potential disruption is a different situation than the last recession.
TRADITIONAL MARKETING DURING A DOWNTURN:
Typically, traditional marketing is basically the same for every agent, although many dress-up their presentations to look superior. In a market that has fast turnover, sticking with only the agency plan is good enough 76% of the time (on average 24% of homes go expired or sell way beyond the normal absorption rate.
Once your property is listed in the MLS:
- Your listing is distributed to all of the same sites
(No agent has an advantage) - Other agents bring buyers to view your property if it matches the buyer’s criteria. Hopefully a buyer puts in an offer.
- Agents are independent contractors. If they choose to do more than the agency plan, that's up to them.
Some agents do more to sell your house than others, but most don’t have a true marketing background. If the agency plan fails, most will be out of ideas other than for you to lower your price. (A lower price is often justified, but not always)
OPEN HOUSES - (DON’T DO THEM NOW!):
In my opinion, doing an open house during the coronavirus outbreak is highly irresponsible. According to news, the coronavirus can live for days on certain surfaces before infecting you, and it can live for hours airborne. Many people won’t know they’re infected for up to 14 days.
SERIOUS BUYERS DON’T WAIT FOR AN OPEN HOUSE:
If your house matches the criteria of a serious buyer, they will come see your house. They are not waiting for an open house to visit. They’ll come if it’s a match.
Video: Open Houses during Coronavirus:
OPEN HOUSE AND QUALIFIED BUYERS:
Half of the people visiting your house aren’t qualified to buy even if they want to put in an offer. It’s always the people who are not represented by an agent that have qualifying issues. The reason is that most people assume they qualify, but many don’t. If an agent is working with a buyer, typically, at a minimum, the agent would have qualified the buyer.
You can't really weed out unqualified people if you're opening your doors to anyone who shows up.
Even without a virus situation, generally, an open house is a poor method for selling your property. There are some situations in which an open house is valid, but the vast majority of times, it’s not in the seller’s best interest to have random people coming through.
If you have a luxury home with a unique feature not evident in the listing description, a broker’s open may be justified, but a public open, probably not.
THE PURPOSE OF AN OPEN HOUSE
The typical open house does not benefit you, the seller. The percentage of homes that sell from an open house are minimal. Excluding model homes in a development, in most locations, the point
of an open house is to gain exposure for an agent. I’m not sure if every agent understands this, but that’s the real purpose of doing an open house. This is not the time
for agent promotion.
(If you’re a believer in open houses, there is a rarely used approach to get more qualified people through the door, but an open house is a weak method of selling for the typical homeowner.)
SHOULD YOU BUY OR SELL NOW?
The correct answer is, it depends. If you’re in contract to sell your house and you need to buy another house, then don’t let the coronavirus stop you.
If you’re a buyer and you found the house you want to live in for the next 5, 10 or more years, buy it. If there is a downturn, it’s not in the normal cycle and we will recover faster than had this been a normal recession.
If you have any questions about selling your house, feel free to speak with Scott about strategies.
READ: HOW A REAL ESTATE DOWNTURN WILL DEVELOP
Coronavirus Info::
cdc.gov/Covid19
cdc.gov/coronavirus/2019-ncov/if-you-are-sick/steps-when-sick.html