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March 17, 2020
What will Covid-19 do with the real estate market? It’s a really good question. Let’s take a look at where we have been, where we are and where we are in the real estate market in Portland and SW Washington.
Where we were:
- RMLS Market Action reported 1.9 months of inventory in February: a strong seller market. Conventional wisdom says that historically, six months is a balanced market between buyers and sellers. I personally think four months is more realistic.
- Multiple offer situations were the norm for homes priced below $ 600,000 when they were reasonably priced. Buyers were often frustrated that an apparently crazy-good deal was struck. An overpriced house is overpriced in any market and is likely to sit (and eventually sell for less than it would have).
- Interest rates fell and then rose (although still much better than last year at this time (4.41%). Purchasing power is increasing. https://ycharts.com/indicators/30_year_mortgage_rate
- The Dow Jones Industrial flirted with 30,000 (closed today at 21,237).
Where are we now?
- The Dow hit 20,000 for the first time on January 21, 2017. It fell below last week after flirting with 30,000 a few weeks earlier. If your down payment comes from paying out shares, this is very important. If not, your future share-based nest egg has clearly hit, but the loss will only be realized if you pay out.
- The Fed cut short-term interest rates to zero. What does that mean for mortgage rates? Nothing. Mortgage rates are correlated but not tied to ten-year Treasury bills. However, mortgage rates reached historic lows and then rose again.
- However, real estate is still heavily modified: NWMLS (Seattle region) has banned open houses. In Oregon and SW Washington (served by RMLS) it is still at our own discretion, but additional precautions are the norm (disinfectants, surface wiping, separation of parties). Reports showed strong participation in last weekend’s open house, although many were canceled.
- Advertisements and listing dates still take place with the same considerations as above. Virtually more is done via FaceTime and other online methods.
- Loan financing, trustee signing and title recording have not yet been completed.
Where are we going?
- Shoppers will rely more than ever on strong visuals from home now and in the near future, including 3D tours (which we do for all of our offerings anyway) and professional photos. Here is an example of a 3D tour for ours 310 NW Maywood Dr. Listing.
- We have released two new offers in the last 24 hours.
- Buyers are at home, watching HDTV and looking for their dream home on Zillow.
- Some buyers are resigning from their house search. Whether according to choice or circumstances.
- Some buyers will enjoy the current market and take advantage of interest rates and some will benefit from reduced competition.
- Sellers usually don’t wake up one morning and choose to sell. This is part of a planning cycle. If you sit at home now, this plan can evolve. When you stay at home, you have the option to pack the clutter, touch up color or sit on the sofa and watch HGTV while searching for your dream home on Zillow. Here, too, there are still listing dates and new listings.
What we cannot predict:
- At this time next year, an old white man (or possibly his vice president) will become president. Will it be your old white man How will white politics affect the economy?
- How long will it take for Covid-19 to be under control? Is it worse than it looks because we are not testing enough or is it better than it looks because we are careful? Do social isolation work for more than two weeks? The last economic crash was caused by the real estate market. This can be saved from the real estate market.
- How long does it take for economically affected buyers to come back to the market? Just when the “summer sales season” begins?
- Will a few “quality weeks” at home with the family convince people that their home is too big, too small or just right? Will they rebuild it or go out and find out what they want to do? When will you do it?
- If I turn the news tonight, will everything up there be wrong?
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