April 2, 2020 –
The coronavirus has changed the American experience dramatically in just a matter of weeks. But what will its impact be on the American dream? The pandemic has significantly changed the outlook for the spring market here in Northern Virginia, which had been shaping up to be an aggressive sellers’ market—until buyers and sellers were told to stay home and self-isolate.
A Bit of Context
In Northern Virginia, about a quarter of annual home sales happen in March, April, and May. In 2020, the market had a strong start here, with new listings up in February 12.2% compared to a year ago. And, the median price of the homes on the market last month was $505,000, up 10.9% from the prior year. The supply was outstripping demand by a lot, setting the scene for a very aggressive sellers’ market.
But then the coronavirus shut the region down and fast. New listings have continued to come onto the market in March—but not at the typical pace for a March in NOVA, and the number of listings pulled off the market spiked over this past week. Most Open Houses were cancelled, and showings have dropped dramatically (down 33% across the US). Competition is down across the region: In February, 60% of home listed for sale were under contract on average in 7 days. Now, only a third are going under contract within 7 days. Prices haven’t taken much of a hit (yet), but there is definitely downward pressure.
Nicholas Lagos, the President of the Northern Virginia Association of Realtors (NVAR), calls COVID-19 a “wild card” for the local housing market. The virus is changing the way agents do business and creating uncertainty among consumers. “It may be a month or two before we see the effects of the epidemic here and what, if any, adjustments our market may experience,” Corey Burr, senior vice president at Sotheby’s International Realty in Chevy Chase, MD, agrees. “Many buyers and sellers have decided to stay on the sidelines three or four weeks and then reassess the situation,” he says.
What Does that Mean for Sellers?
Sellers will need to recognize that, despite low interest rates, demand is going to weaken. As a result, prices will likely go down.
Would-be sellers that have flexibility could defer listing their homes in the hope that the market recovers quickly and demand bounces back. However, the long-term economic impacts of this pandemic are just not clear. Restrictions related to the virus could last months, possibly into the summer. Job losses due to COVID-19 could dampen demand even further.
Those homeowners who need to sell now will need to work creatively with their agent. My advice is to make sure you are marketing your home appropriately, making it possible for potential buyers to safely view your home, and be realistic about the price you will get.
Buyers with secure jobs are actually in a good position to buy now because interest rates remain low and other buyers may be worried about the virus and their jobs. Also, sellers may now be more flexible on pricing, knowing that there are fewer buyers out there.
But, buyers will still face virus-related challenges. Some sellers are pulling their listings over concerns about the spread of the virus or not allowing in-person tours. And, there could be challenges associated with finding appraisers, inspectors, and contractors who are willing to enter occupied properties.
My Two Cents?
The future of the market is still very uncertain. Be wary of anyone who tells you differently. No one can know what markets or even life will look like in the next 4, 8, or 12 weeks. Be especially wary of anyone promising that this will be a blip in the market and that we’ll be back to normal by summertime….
In times like these, I believe buying and investment decisions should be made based on the long term—like 5 years or more—and you have to plan for both the best- and worst-case scenarios.
Please be smart. Be careful. And stay home! And if you would like to talk more about the NOVA housing market, give me a call. I am available to help you plan and prepare. #stayhome #alonetogether