Can virtual tours, phone calls and video conferences replace the real thing?
Point2Point conducted a survey of real estate agents and professionals nationwide to find out.
So far, the answer is no as Real Estate Agents Assess the Post-Pandemic Future of Homebuying.
- The bulk of the agents who took the survey (77%) stated that they noticed quite a massive drop in homebuyers’ interest, or at the very least a drop in the decision to act on it.
- 65% of agents stated that they are either extremely anxious or very worried and concerned about the future of their business.
- Almost half of the respondents (47%) expected at least 50% of their business to simply vanish following this period of inactivity. Those who were slightly more optimistic were, once again, a very small minority.
How Big of a Financial Loss
How long do you think it will take to get back on track?
I suspect the majority (63% at 6 months or less ) are way off base.
From restaurants to hotels to home buying, Don’t Expect a Return to Normal This Year
Mish
There may be a mini boom when the lockdowns are lifted. There seems to be some pent up demand fleeing urban areas. Around me, anything that has a little property around it suitable for a decent garden and a chicken coop is selling like hotcakes. Gone within a week, no in person tour needed. I can see that trend continuing.
Supply in WNY is at historic lows. Supply even in the low end prices. Real Estate is always a geography-centric argument.
Expect more Chinese money to flood American real estate like it did during the last crisis.
Exactly!
Chinese are having liquidity issues of their own and with two major continents not buying their stuff where is the money going to come from?
Not the government. Chinese people that stash money away in North America. They already provided a floor in the real estate market by being all cash buyers. I don’t think the downturn in real estate is going to be like the previous one.
I think that some businesses will never get “back on track”, while others will see fundamental increases. It’s a major shift in the economy, for better or worse. I think we will see more people working from home forever; some tried it and like it, and some businesses tried it, and found it worked fine. Also, I think we’ll see more online classes, and more online conferences, along with less travel.
Businesses that will see permanent declines include things related to office work such as business clothes sales, drycleaners, business lunch places, autos, gasoline, office furniture, and office real estate. Things related to travel will also see permanent declines, such as hotels, cars/auto, airlines, conventions, cruise ships, and the like.
What will gain? That’s harder. Perhaps home office furniture, networking gear, teleconferencing software, and local recreation. I’m not saying it will be a complete shift, just a 5-10% permanent shift, but that’s enough to make a big difference.
Since this posted to a thread about home buying another possible shift is in the types of homes people are looking for. They may want space for a home office, for example.
Artificial intervention in markets, only postpone the inevitable and make the problem worse.. I think the intervention this time will be much less than people think.
Why do you think this time is different?
🙁
I’m looking to buy condo in SoCal. All good properties fly in couple days after listing and with above listing price. Lies,big lies and statistics. Just my two cents!
Top tier properties are always the last to decline, and they never decline as far as other properties. Also, you are probably early. We are in the forbearance phase and defaults have not started. Price declines start only after increasing defaults are well underway. Even then, there may not be huge declines in price in top markets if lenders are determined to hold the real estate on their books instead of realizing losses. There was a surprisingly large amount of that in the last cycle.
Here in N CA. it seems the housing market already was slowing dramatically. Who thinks its a good or fair deal to buy a fixer in a bad location or neighborhood in decline for 400k? not many. Thats about $400 a month property tax! just the property tax. that doesn’t include anything else that makes your life.
Prices have to come down because incomes just can’t rise that much.
Illegal immigration is a big part of the problem. If you use a ratio of 10 to a dwelling and gov cokehead admitted there’s about 3,000,000 in Ca, thats 300k dwelling’s not available for citizens.
If you deported just half, 1.5 million, that would free up 150k dwellings for citizens and then it wouldn’t cost $1500 a month for a 1 bedroom apt.
There is no affordable housing problem here in Ca., there’s an illegal immigration problem.
Do you have any data on suburbs versus cities? I am in Chicago and a few lotta gage banker friends in the suburbs have seen sales activity spike, especially below the jumbo mortgage loan level. I see sales activity in the city dropping to almost zero. Anecdotally, a lot of my friends have talked about moving. I’d be curious to see breakdowns of data between cities and suburbs as well as regionally. Personally, I’ve been surprised how easy remote working has been and I’m taking this as a sign to move out of the city to the country.
Same where I am, Hudson Valley, 2 hrs from both NYC and Boston. While traditionally a second home market, recent trends have shifted to younger DIY/homesteader types who realize they can WFH. Supply had already been tight the past couple years; hard to say what will happen when the market opens up. Pent up demand? Surely, but I’m not convinced there is corresponding pent-up supply. I realize this is a fairly small market, but it points out the difficulty in projecting macro trends in housing. Subdivision-construction slowdowns in exurban Austin or Nashville or Orlando do not represent the entirety of the US housing picture, and, further, do not necessarily portend Armageddon: people have to live somewhere. I would agree that transactions will slow down in the intermediate term (which is the point of the post). But whether this translates to prices cratering? I’m not convinced.
When it comes to housing and residential RE price; I see a lot of commentary on the net and here about how this is going to kill house prices, and sales may drop by 50% or more and that is sort of a fact that fits in the DUH category of finance, but that does not mean prices will drop much, or at all, and any drop will be temporary.
First, everything is dropping in both supply and demand, people are locked up. It is temporary, after all who wants a stream of strangers coming through their house poking into every corner along with inspectors, surveyors, agents, so houses are being withdrawn from the market by about the same margin as buyers are withdrawing. They are still house shopping online just putting off going to see the houses till this situation calms down.
I shopped for a house from Oregon in Florida. I knew what I was looking for and had a specific region targeted. But, I would never in a million years dream of buying a house without a personal inspection. Photos on Zillow or RE.com are a good guide to what is available and to provide you a list of good candidate properties to see, but very few people are stupid enough to buy a house remotely. And the motivation for sellers is even lower, in Florida for example a RE contract is not enforceable if the buyer has not ever personally inspected a property, they have to at the very least have a competent representative inspect it in person on their behalf. And even then flaws in the property can be a source of dispute and cancellation of the contract if they later crop up and the buyer claims misrepresentation by either the seller or their own buying inspector.
The real problem here is people are trying to apply macroeconomic theory about supply and demand that is just not appropriate to a disrupted market under the circumstances. Yes sales are going to be seen to have dropped massively, but that is not actually a drop in demand because the underlying demand is for shelter, and people will always need that in relatively predictable amounts. This is a case where every sale that is deferred is simply pent up. Once released it will actually drive prices noticeably higher as buyers get back into the market and compete for scarce listings. And please do understand that listed properties were in falling supply when the virus hit. Add to that much lower interest rates and you have a cocktail for higher prices. Add to that Fed direct intervention in mortgage markets in “unlimited” quantities and we could see one of the biggest upward moves in price we have ever seen once the economy reopens.
US housing is on of the largest asset classes on the planet and the Fed has said that they
But who is going to buy and with what incomes?
There are always buyers, demand for housing is one of the most inelastic of all demands. Even in the Great Depression with 30% unemployment home prices did not fall nearly as much as most people believe.
They fell like 50% no?
Yes indeed housing prices did fall 50% and more in some markets, but, that crash in the GFC was a one off and TEMPORARY! Prices as of January were higher than they were before the GFC. If you look at the long-term graph of US residential real estate that dip in price looks like just what it was, a flash crash, a dip in a long uptrend.
“but that does not mean prices will drop much, or at all, and any drop will be temporary.”
…
Thanks for the laugh
And no one thought the FED would buy junk bonds either, but there it is.
I think it’s safe to say whatever outcome the FED desires is what they’ll do. Maybe they view RE as TBTF, maybe they don’t.
I bet they do.
“I bet they do.”
…
OK, I’ll bite.
Tell me – EXACTLY – what they will do stem the turn to the downside?
Cover all bank loan losses from short sales vs. “mark-to-fantasy”? Give Fannie and Freddie a few trillion?
Say millions of underwater mortgagees walk away from their properties. The market craters from that flood. A $1M house now worth $500K. Bank would rather hold than sell at a loss. The FED via Fannie/Freddie compensates the bank for selling by kicking in the difference (say benchmark Dec. 2019). Voila, RE prices hold.
The pricetag? $10T? $100T? But yes it can happen because it’s already illegal for the FED to own junk bonds. There are no limits anymore.
Will it happen? Maybe, maybe not. I bet it will.
Of course, it’s completely immoral but then they’re not in the morality business.
“But yes it can happen because it’s already illegal for the FED to own junk bonds. There are no limits anymore.”
…
There are still limits. Federal Reserve buying junk in conjunction with US Treasury (via SPV) … and with restrictions … including amount + haircuts.
Well, then the limits are whatever the TPTB agree to. Let’s not pretend the law matters anymore. That still makes extreme unprecedented action more likely.
It actually TECHNICALLY is not illegal for the Fed to buy junk bonds or anything else Mr. P. They are required to limit purchases to investment grade bonds and MBS but then there is that little clause in their charter that says they can decide what and when to buy in “exigent circumstances.”
If the FED doesn’t allow markets to adjust down to where young people feel like they’re finally getting a fair piece of the pie, then you can count on Alexandria Cortez being voted in by 2028. The game is getting very old and more transparent each year. But sadly, young people have been conditioned by educators with an agenda to label this fraud “Capitalism”, and there is no changing their minds at this point.
Agree with every word.
Latest on Fed’s expansive rescue programs to keep credit flowing during the coronavirus pandemic
Published: May 1, 2020 at 11:17 a.m. ET
By Joy Wiltermuth
64
Fed says $2.3 trillion in aid might not be enough
marketwatch.com/story/heres-a-breakdown-of-the-feds-rescue-programs-to-keep-credit-flowing-during-the-pandemic-2020-03-20
The Fed has already spent more than half a trillion directly on MBS paper and a lot more to come.
“The Fed has already spent more than half a trillion directly on MBS paper and a lot more to come.”
…
So?
They have been buying for 12 years. Homeowner still has to make monthly nut. The Federal Reserve stepping in has only lowered (some) the first “I” in PITI.
I am just answering DLEP’s question: “But who is going to buy and with what incomes?”
The Fed said it was not going to permit asset prices to crater as in the GFC. And they are buying mortgages more or less directly at this point.
Tony, it is below your normal posting standards to belittle a post without making any sort of counter argument to support your position. This isn’t Zero Hedge you know. If you disagree say why and support your claims.
Houses are bought and sold all the time that is correct. But those that claim real estate only goes up forget the 2007 RE crash. Funny money loans contributed to that implosion, this time around funny valuations will help kill prices.
For 4 years and then it went right back to where it was.
All real estate markets are local and not all went back to where it was.
Only because interest rates resumed their steady slide down to zero…goosing the market enough to reignite the speculation flame. THEN, as if rock-bottom interest rates weren’t enough, funny lending reared its ugly head again in the form of non-bank lenders. So, it’s not surprising at all that the bubble re-inflated, and it should be no surprise to anyone when it deflates again.
Airbnb is pretty much all you need to know. Any future millionaires with 10 houses are hosed. Plus airbnb in some areas was probably 10-20% of the market. Those houses now need to be sold. Add in flippers and just people who thought they would be conventional landlords.
Then consider the sheer number of people who will be un and under employed. With tightening lending standards not so good.
Demand on the low end destroyed as illegal immigrants go home. They do not qualify for any government help. Their main job base construction is gutted. Their wives and girlfriends were hotel maids and worked in restaurants. The food banks and churches that help them are floundering. So I assume 6 million or more will go home
The oil industry probably not coming back for a while. Hotels and resteraunts not coming back for a while. Airlines um yeah. Retail just not coming back.
There will be uncertainty until there is a vaccine probably never, or until this runs its course.
Any one of these factors is bad. All of them combined are devastating. Housing as a retirement vehicle well Its dead Jim
Tightening lending standards? The Fed has GUARANTEED all major asset classes and said they will pour “unlimitied” quantities of money into them to prop up prices to prevent another 2008/09, why would you not believe them? You are making the mistake of cherrypicking supply and demand arguments to favor decline in demand and exaggerated growth in supply. Do not mistake temporary emergency measures restricting both supply and demand with macroeconomic supply and demand trends, people still need housing so any temporary setback to demand simply becomes pent up demand. There is a strict limit to how much equity sellers can give up to make a sale. Very often (usually) the asking price must be at least what they owe. If they can’t get that then the house is withdrawn from the market and supply falls.
All in all I see the entire Corona episode as having a major impact on a temporary basis equally to supply AND demand, but no long term effects post emergency. In fact a trend has already been spotted by professionals in the industry towards lower density single family homes over higher more urban multifamily. Once demand is unleashed it will be competing for fewer homes, that will then drive prices in a more normal market. That and sub 3% interest rates on mortgages.
I posted a story link from CNBC about the carnage in farm prices and the Ag sector the other day that points out the problems with trying to apply normal supply/demand theories to an emergency situation. I went to Publix and wanted yellow squash to go with dinner but would not buy it because they were $2.49 per pound which is about $1.49 more than I have ever paid for it, I could not make my hand reach out for it. Most of the time squash and zucchini floods the market to the point you can’t give it away once summer comes along. The CNBC story showed a massive pile of squash a farmer was plowing into the ground because he could not sell it, yet the price in the grocery store is so high they can’t sell their supply. I am proof that there is demand at price A, but that price is easily doubled that so it will sit and rot. If macroeconomic supply/demand worked in this kind of market dislocation the price would be lowered till the supply cleared. But, the supply chain has reached the point where they prefer to destroy supply till it supports the priced demanded.
That leads to INFLATION not DEFLATION.
I’m still amazed how many people I know think that housing will be just fine, or if there is a correction it will be minor. This isn’t just for any one particular area, these people are in far-flung parts of the US.
Apparently in this ZIRP fueled Covid fallout era, we’re still in the denial phase. Does anger come next, or will we hurtle straight into bargaining and depression?
Well, what happens when every mortgagee is under water? How will the banks deal with millions of vacant properties? They won’t sell for a loss. County governments losing big $$$ on property tax?
I think Time To Test is on the right track with some kind of FED intervention. The days of the large-scale housing market crash are over or kiss America goodbye.
“They won’t sell for a loss.”
Only because The Fed has made it it’s core mission to rob children to starvation, in order to cover up the cost of idly sitting on property. To keep the rank idiots comprising all banksters flush.
All true.
They will just stick them in some special asset vehicle and drive them off the cliff. Suddenly they all just vanish into thin air. lol
Air travel will be last to recover, and by that extension hotels. Restaurants will just muddle through as best as they can relying on take out orders.
Cruise ships? ROFL. Might as well rename all their ships Titanic.
Las Vegas and gambling? Toast. But maybe not given their clientele.
You can also add in Urgent Cares and hospitals.
Talk about places people don’t want to go.
Airlines have been eeking out survival by wedging ever more of us into smaller and smaller seats for decades and they still manage to go out of business (though in that event they just get taken over by a larger airline which then manages to convince the FAA they can get another 20 passengers safely onto each plane). But, restaurants and bars go out of business at one of the highest rates in the business world because they operate on incredibly slim margins. That is why corporate bars and restaurants have taken over, the corporations have the borrowing power to operate venues at a loss for years where a private individual mostly has to make money the day they open their doors. So, this pandemic is going to see some of them shuttered, even after this they will still shake out because right now we have a lot of forebearance but that will end and the business owners will find themselves deeply in arrears.
Another industry that operates on slender margins and which will have to charge higher prices or go out of business is grocery stores. This was one of the reasons I so hate Whole Foods and the absolute spoiled morons that shop there. They have shown the industry that they can get away with arbitrarily doubling prices to consumers. And so all grocers are upscaling and arbitrarily raising prices.
But, the nature of restaurants is NOT about slop shoots to fuel up your body on the cheap, human nature made them what they were, and humans are social animals like other primates. They are not going to stop being social animals or organizing their economics just because of a minor pandemic and after a few years this Covid event will be seen as serious and stressful but basically minor in the context of previous pandemics like the black death and polio.
Las Vegas will change. Nationwide (global?) online gaming will become legal. NV will become home to server farms instead of buffets and room upgrades. Then the TV shows about gaming will become popular and the strip will become a TV set. See also: The NYSE and CNBC.
Let prices drop and allow young people finally be able to afford a house
Exactly, what would home prices be without govt subsidies, ie interest rate suppresion by the fed, property tax deductions, mortgage interest deductions and GSE guarantees on the loans. This is only a gift to the builders while driving the prices of homes beyond where they would normally be. Hence the unaffordability of housing. Unfortunately people are duped by this govt ruse. They think all these subsidies are making them more affordable while exactly the opposite is true. Crony capitalism at its finest. Free market capitalism is dead.
“This is only a gift to the builders while driving the prices of homes beyond where they would normally be.”
It’s not a “gift to the builders.” Builders, in aggregate, are competent people who do something useful.
As always, the gift is to idle, incompetent leeches who don’t know how to build, nor how to do anything else useful, yet gets to just sit there idle while being handed wealth The Fed and government robs from children being thrown out into the streets and left homeless.
If the goal was to hand a “gift to the builders,” leaving people hence markets free, would be the policy. If people could build anything anywhere, and interest rates no longer subsidized useless, parasitic leeches idly sitting on buildable land; builders would have an awful lot more work coming their way. In San Francisco alone, I’d be surprised if there’s not sufficient demand to, literally, ten-double the housing stock. That’s millions and millions of new units, with all the jobs (good ones too, since building tall and dense in an earthquake zone isn’t trivial) in both immediate construction and equipment and subcontracting this entails.
But instead, as always in progressive financialized dystopias ran solely by and for abject garbage without a single talent for anything whatsoever, the goal is to ensure only rank idiots on Fed welfare, get to live somewhere other than in a slave shed in a ghetto. Solely in order to make them desperate enough to continue picking cotton as told, without getting uppity.
Stuki. Not everyone who participates in the economy are idle leeches and I for one am sick to death of human beings called names like leech just because they are not yoeman farmers totally self sufficient.
We have a feature in economics called the division of labor that allows for specialization so that people can work at one thing and offer services and goods to others more economically than if we each had to build our own houses and cars and grow our own food and invent all the time.
Are there a few people who will take advantage of that? Of course, but the vast majority of people prefer to do their part and to contribute.
In your alternate universe of laissez-faire capitalism we would ALL have less. Much less of what we need. It has been tried over and over and has always proven that it only works for a few people like the Rothschilds. Total unfettered capitalism comes at a price and that is a significant minority of people left entirely out of the economy, and it works no better than the idealistic communism that keeps getting tried and failing with mass starvation each time it is tried. It leads to overcrowding, no toilet paper, and food shortages.
Everything you have is because the economy is what it is. If we had your version of economics you would be outside eating shit with the chickens.
“..called names like leech just because they are not yoeman farmers totally self sufficient.”
It has nothing to do with being self-sufficient in a narrow sense.
But if you do NOTHING productive, nada, zip, zilch; yet are handed lots of resources by The Fed and Government simply because you “own” a house, which is inevitably deteriorating as it sits there; you most certainly fit the requirements for being called a leech: Since you create nothing; if you are handed something, that something has to be taken from someone else.
Division of labor describes parties all contribute something. It does not describe some slave working his butt off to produce something, only to have The Fed and Government confiscate everything he produces on behalf of someone who produces no value at all in return. Not everyone needs to produce something tangible. Writing a song that millions love listening to, is also producing value. But simply getting rich off of “owning” a company which would have been bankrupt without The Fed manipulating interest rates, produces n-o-t-h-i-n-g. Hence every single penny saved by being rescued, has to, by simple arithmetic, be stolen from someone else (stolen because if it was voluntarily surrendered, you wouldn’t need Fed and Government intervention, a simple stock or bond issue would be enough). That is leeching. The definition of leeching.
It needs to be noted that one can leech without doing anything wrong, nor even morally reprehensible. It’s not the fault of some guy who just bought a house to live in, that The Fed insist on robbing others on his behalf while using his house as the vehicle by which to conduct that robbery. Most homeowners don’t have much say on the matter either way. They’re just lucky enough to be caught on the profitable side of the massive, all encompassing experiment in systemic theft that is financialization. If they, on account of benefiting from it, end up supporting the rackets (as in making excuses for the existence of central banks, bailouts etc.), that’s a whole ‘nother story, though.
OKay its not a gift, it just raises the prices of homes so the builders can make more money and houses become unaffordable. What would you call that?
” What would you call that?”
A gift. But not to the ones physically building houses.
It’s a gift to those who own the land they are being built on.
All the money gifted to those guys, has to come from someone else. Those someone elses are partly prospective buyers of the houses, but also partly the builders, who end up building a smaller, shoddier and hence cheaper houses, since some of the buyers’ available funds is diverted to some idle leech in the form of a government mandated gift, instead of to the guys who actually build some value.
I fully expect the Fed/gov to step in and buy mortgages to allow people to live in their house indefinitely.
There is a neighborhood being erected near my house that went bankrupt in 2008. They just restarted construction on it about a couple months ago. I doubt it gets finished this time either. I know a business owner that just had 4 neighborhood dirt work contracts postponed.
I live in one of the fasted growing most stable markets in America.
Mortgage lenders demand higher credit scores as the coronavirus threatens the housing market
Tightening credit conditions is a deflationary symptom because it results in less money loaned.
A few banks have announced tighter lending standards but we all know that the moment they refuse to leand someone else will step in and lend in their place.
Mortgage lending has NEVER in the history of the universe been more profitable than it is right now, banks are essentially loaning out free money at more than 300 basis points above what they get it for. The Fed is giving them money at less than zero percent in real rates.