Governor
Roy Cooper has scheduled a lifting of the stay-at-home order for North Carolina
on May 9. To date, there is no
expectation that the Charlotte metropolitan area will extend any stay-at-home
order after that date. Real estate
services will be deemed “essential services” after May 8, so the business of
buying or selling a home should begin to move closer to normal, subject to
social distancing and other precautions, beginning on May 9. A discussion of North Carolina
guidelines
for dealing with the coronavirus health crisis is beyond the scope of this blog
post. I will limit this discussion to
factors affecting the real estate market after May 9 and going forward.
It
is likely that even after restrictions on meetings are relaxed there will be a
reluctance on the part of some to interact with others. This will affect all businesses and
commercial activities, including real estate.
There is really no way to know how deep or lasting this reluctance will
be. I would prefer to focus on more
measurable predictors of activity.
One
very measurable indicator is mortgage interest rates. As of May 1, 2020, mortgage rates continued
to fall on a month-over-month basis to an average of 3.52% for a 30-year fixed
rate mortgage. Mortgage rate
trends
are expected to remain at nearly historical lows into the foreseeable
future. Of course, that makes the
purchase of a home or investment property more affordable. It can even make the purchase of a home
financially preferable to renting a home because monthly housing expense can be
lower to the owner than the renter; and the possibility of building equity in
the home over time provides a very real and attractive incentive to own a home.
Another
predictor of market activity is the supply of available homes in the context of
buyer demand. It is no secret that the
residential real estate market immediately preceding the COVIT-19 crisis was a
“seller’s market,” characterized by low inventory and a relatively large number
of buyers competing for the limited inventory.
This often resulted in multiple offers on homes, and contract prices
routinely bid up above the listing price. I have seen no reliable data to
indicate a real shift in that market dynamic as the Charlotte metropolitan area
re-opens. However, one less measurable
factor mentioned above could affect the market in favor of some buyers during
the early stages of re-opening.
If
some home buyers are at first reluctant to meet with brokers to view homes of
interest, there may actually be less buyers competing for the limited inventory
of homes available—at least in the early stages of re-opening. Listings that might have promptly received
multiple offers in February might therefore receive fewer offers due to the
reluctance of some buyers to “put themselves at risk” by viewing properties. This might give a somewhat short-lived
advantage to those prospective home buyers who are willing to engage in market
activity early on.
Housing
and home ownership are fundamental pillars of the U.S. economy, and there is
little expectation at this point that this will change. The short term economic downturn caused by
the coronavirus pandemic was not the result of weaknesses in the economy—it was
the result of the shut downs caused by the pandemic. As long as the overall economy begins to move
again—and displaced workers are able to get back to work and therefore support
their previous goal of home ownership—the real estate market should return to
normal in relatively short order. And
while an estimated 10% of North Carolina’s workers have
applied for unemployment benefits since the health crisis began, most are
likely to return to work before the end of 2020; and even a 10% or 15%
reduction in the number of prospective home buyers actively seeking to purchase
a home is unlikely to have a substantial impact on the Charlotte real estate
market when business begins to open up again.
