As the Charlotte Area Re-opens, What Can We Expect for Real Estate?

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.