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As the coronavirus (COVID-19) continues to evolve, REALTORS® expect the outbreak to negatively impact their business, primarily in the areas of home sales and time on market. Flash pulse surveys by both the California Association of REALTORS® and the National Association of REALTORS® imply, at least in the short-term, that home sales will be down compared to what would have been the case due to the spread of coronavirus.
According to the C.A.R. flash pulse poll conducted March 6-9 via email, due to the coronavirus outbreak half of California REALTORS® expected there will be a negative impact on home sales and 49 percent said time on market will be impacted. Conversely, 36 percent said they expect there will be no impact on home sales or time on market (38 percent).
Other areas that REALTORS® said would be negatively impacted were home prices (40 percent), closing (38 percent), supply (37 percent) and market competition (28 percent). More than one-half (55 percent) said there would be no impact on market competition, closing (53 percent) or price (45 percent). More than one in four REALTORS® (26 percent) said they had clients who put their home purchase or home sale on hold, and more than one-third of REALTORS® had clients asking them coronavirus market-related questions.
With the situation still uncertain and changing rapidly, Joel Singer, CEO of C.A.R., said, “It is a logical reaction to this reality that the global economy will be slowing in historically unprecedented ways for some period of time.”
NAR conducted a similar pulse survey of members on March 9-10, 2020, a week after C.A.R.’s pulse survey. NAR’s Economic Pulse Flash Survey found among REALTORS® who responded, 37 percent said lower mortgage rates excited homebuyers much more than the stock market correction, yet almost eight out of 10 (78%) said there has been no change in buyer interest due to the coronavirus. Sixteen percent said buyer interest has decreased due to coronavirus, with members in California and Washington State citing larger decreases in buyer interest, 21 percent and 19 percent, respectively.
Nearly nine in 10 members (87%) said coronavirus has not affected the number of homes on the market. In Washington State and California, 5 percent and 4 percent of members, respectively, reported homes were removed from the market.
“Given that a home transaction is a major commitment, the uncertainties on how the economy will play out and the spread of the virus itself are barriers to homebuying and selling. The stock market crash is no doubt raising economic anxieties, while the coronavirus brings fear of contact with strangers,” said NAR chief economist Lawrence Yun. “At the same time, the dramatic fall in interest rates may induce some potential buyers to take advantage of the better affordability conditions. It is too early to assess the likely impact as to whether lower interest rates can overcome the economic and health anxieties.”
Due to coronavirus concerns, C.A.R. and NAR have cancelled meetings and suspended non-essential volunteer and staff travel for association business. Also cancelled is the annual REALTOR® Legislative Day set for April 28. Legislative Day is the one day each year when over 2,000 California REALTORS® travel to Sacramento to meet their respective legislators and discuss real estate-related legislation that could impact property rights, their clients and their business.
In accordance to the March 17-April 7, 2020 Shelter in Place directive, the Silicon Valley Association of REALTORS® (SILVAR) office in Cupertino will be closed. Staff will do their best to serve members while working remotely. Members can email membership@silvar.org with questions.
“Our primary concern is the health of our members and staff. This is the “new normal.” When the Shelter in Place order is lifted, all broker tours, open houses and showings will resume,” said SILVAR Executive Officer Paul Cardus.
Even though income and sales volume of REALTORS® have dropped slightly in the past year, membership in the National Association of REALTORS® has increased, as more younger agents continue to enter the industry. According to the “2018 National Association of REALTORS® Member Profile,” membership increased 6 percent from 1.22 million in March 2017 to 1.30 million in April 2018.
“Younger Americans are seeking business opportunities that working in real estate provides,” said NAR chief economist Lawrence Yun. But Yun also noted the overall trend is still a slightly older age profile.
Members of NAR account for about half of all active real estate licensees in the U.S. REALTORS® go beyond state licensing requirements by subscribing to NAR’s Code of Ethics and standards of practice and committing to continuing education.
“All real estate licensees are not the same. Only real estate licensees who are members of the National Association of REALTORS® are properly called REALTORS®. They display the REALTOR® logo on their business card or other marketing material,” explained Bill Moody, president of the Silicon Valley Association of REALTORS®. The REALTOR® association has over 4,500 REALTORS® and affiliate members engaged in the business of real estate on the Peninsula and in the South Bay.
“REALTORS® are committed to treat all parties to a transaction honestly. REALTORS® subscribe to a strict code of ethics and are required to complete a two and a half hour Code of Ethics course every two years,” said Moody.
The NAR member survey found the median age of REALTORS® was 54 this year, slightly up from 53, the last two years. Sixty-three percent of realtors are female. The typical REALTOR® is a 54-year-old white female who attended college and is a homeowner.
Sixty-five percent of REALTORS® are licensed sales agents, 21 percent hold broker licenses, and 15 percent hold broker associate licenses. New members tended to be more diverse than more experienced members. Twenty-five percent with two years of experience or less were minorities, up from 22 percent last year.
According to Moody, the national survey reflects the profile of incoming members in the local REALTOR® group, which has over 4,500 members. “Our new members definitely reflect a younger and more diverse group of agents,” said Moody.
Impacted by low inventory, the typical number of transactions decreased slightly from 12 transactions in 2016 to 11 transactions in 2017. REALTORS® said the main factors limiting potential clients in completing transactions are difficulty finding the right property (35 percent), housing affordability (17 percent), and difficulty in obtaining mortgage financing (12 percent).
In a span of one week, two top officials have told Silicon Valley REALTORS® that, at least for the Bay Area, particularly the Silicon Valley region, the worst for home sales is over, that there are better days ahead. However both of these officials said a full recovery will take time.
At a general membership meeting of the Silicon Valley Association of REALTORS®, National Association of REALTORS® Chief Economist and Senior Vice President of Research Dr. Lawrence Yun told REALTORS® “the worst in (home) sales is clearly over. … Even in the worst market, the bleeding has stopped.”
Dr. Yun at the SILVAR general membership meeting.
Yun said, particularly in the San Francisco –San Jose area, the bottom has already occurred and prices are beginning to firm up.
California’s housing market recovery started even before the home buyer tax credit, according to the national economist. “California’s housing market correction was short, sharp and fast,” Yun said.
The key test will be this winter. “If this winter’s sales match up with other winter home sales, I would say that would be a very positive sign,” Yun said. “Let’s give it time.”
In the meantime, Yun said those with strong credit who can buy, should buy, while mortgage interest rates are still at a 50-year low.
“I don’t expect rates to remain low. They may increase next year,” Yun said. “If you’re willing to stay well within a budget and are comfortable with it, at a 4.4 mortgage interest rate you’re protected under inflation.”
Check out Yun’s PowerPoint presentation here.
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California Department of Real Estate Commissioner Jeff Davi spoke at a SILVAR District tour meeting in Los Gatos last week and said much of the same thing. He told REALTORS® that “there are better days ahead.”
Davi marveled at the vast improvement in housing affordability and historically low interest rates. “I promise you this, rates are not going to stay at 3 or 3.5 percent fixed. The affordability index is fabulous. Buyers are now better off. They have great opportunities in this market,” Davi said.
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Left to right: SILVAR President-elect Gene Lentz, DRE Commissioner Jeff Davi, Board Director Suzanne Yost, Los Gatos/Saratoga District Chair Bill Rehbock and C.A.R. Past President Jim Hamilton.
So, what’s holding back a full recovery?
Yun said the unemployment rate has stopped rising dramatically, but it is still high, and while we are seeing some job creation, it’s not coming quick enough and not large in numbers. Corporate profits are rising, but business spending is down. Businesses continue to hesitate because they’re uncertain about how they will be impacted by health care legislation, the recently passed financial regulatory bill and potential taxes. Right now, they realize they can still make a profit with fewer employees.
“We need job creation. If business spending increases, the economy would be more robust,” Yun said.
Pay attention to foreclosure numbers, as these numbers will signal what’s ahead, Davi said. In 2006, there were 12,000 foreclosures. In 2008, there were 240,000 foreclosures. Last year, the number of foreclosures slightly fell to 200,000 – still a lot, but a good sign, nevertheless. Foreclosures need to get back to the 2006 level, Davi said.
Silicon Valley Association of REALTORS® says ... 