By: Jennifer A. Kingson
“It’s not just emotional buying, real estate agents say: There are smart and strategic reasons that Americans of all ages, races and incomes are moving away from urban centers.
Why it matters: Bidding wars, frantic plays for a big suburban house with a pool, buying a property sight unseen — they’re all part of Americans’ calculus that our lives and lifestyles have been permanently changed by coronavirus and that we’ll need more space (indoors and out) for the long term.
Driving the news: There’s a gold rush in real estate across the U.S., driven by record-low mortgage rates and the dawning realization that for many of us, our homes are going to be the only place we work and play for the foreseeable future.
- The trend started in the spring when school was cancelled in many areas, and has gained steam as companies have allowed workers to continue working from home (in some cases, indefinitely) and as question marks have arisen over in-person school this fall.
- While spacious single-family homes in suburbs and exurbs are in hot demand, apartment rents are falling in places like Manhattan, where landlords are offering deals to entice tenants.
What buyers are looking for: Fresh air, backyards, home offices (for two adults), a homeschooling area, space for pets, home gyms — plus proximity to beaches, lakes, parks and bike paths.
- “Preferences have moved from ‘what’s a prestigious location?’ to ‘what’s practical?’ and ‘what’s the quality of life we want for our households?'” Anna DeSimone, a housing finance expert who writes guidebooks for consumers and mortgage professionals, tells Axios.
- Searches on the Compass Real Estate website for houses with pools are up threefold, searches for single-family homes are up 40%, and searches for condominiums and co-ops have decreased, Compass CEO Robert Reffkin told CNBC.
As more people do their grocery and household shopping online, proximity to retail stores is no longer a real estate priority.
- “We’re not hearing as much around brick-and-mortar, where’s the closest this-or-that,” Kris Lindahl, CEO of a real estate agency in the Minneapolis-St. Paul area, tells Axios. “Instead it’s ‘can we get delivery here?'”
Between the lines: Some people are moving because they find that — now that they spend most of their time in the same place with the same people — they are dissatisfied with their current housing.
- “When you’re spending nine-plus hours a day at home, you’re going to see things differently,” Lindahl says.
By the numbers: Existing home sales rose 20.7% in June over May, and median housing prices rose in every region of the country, according to the National Association of Realtors.
- Sales growth is particularly pronounced in more affordable regions like the South and the Midwest, Lawrence Yun, the NAR’s chief economist, tells Axios.
- One new trend he identified: “People wanting to buy out in the suburbs and away from city centers.”
Unlike in decades past, the move toward the suburbs does not represent “white flight,” but rather the work-from-home phenomenon, Yun tells Axios.
- “The people moving to the suburbs are of all races and ethnicities,” Yun said, noting that equal access to housing in all areas is “the law of the land.”
Inventory of available homes for sale — which was low even before the pandemic — has grown even scarcer, to the point that realtors are knocking on the doors of desirable homes and asking the occupants if they’d consider selling.
- “It’s been nutty for the past couple of weeks,” Andrea Paro, an agent at Compass Real Estate in Bethesda, Md., tells Axios. “I am trying to fasten the seat belt and just ride this.”
- She recently listed a single family house in Falls Church, Va., and immediately got 64 requests for showings. “I’ll probably get 10 offers,” she says.
Despite the logic in the market, some percentage of buyers are making purchases based on panic or other emotions — and those are the ones who may rue their decisions or find that their homes don’t hold their value.
- In the New York City area, that can mean that buyers are “paying $50,000 more so they can move out to Connecticut and ride their bike and go to the beach,” DeSimone says.
- All too often, she says, “When people are making an emotional or hasty decision, that real estate investment is not going to grow.”
By: Amy Snook
Special to the Boca and Delray newspapers
Our world has changed so much in just a few months. For those of us fortunate enough to maintain our health during this crisis, we were forced to manage our lives in a very different manner.
We learned to work from home, we learned to balance home life with work with absolutely no escape for quiet time. We were forced to slow down and even developed some new skills out of necessity. Many of us are now Zoom experts, learned how telehealth works, learned to enhance our cooking, homeschooled our children, learned the importance of human interaction and friendship, and even learned how to workout at home. Buried in all of the sadness and dismay that came with COVID-19 were some very relevant and important life lessons about priorities.
The hope is that we all implement changes to our lives, for the better, and grow as a world moving forward. People in general are evaluating their lives and in particular where they are living their lives. They are looking at how best to protect their families and how best to survive in a catastrophe such as the one(s) we have been experiencing.
It therefore makes perfect sense that people from big cities are evaluating whether to remain living in the city or to move to the suburbs. Quarantine was difficult for everyone but for those of us in warm weather, we were afforded an opportunity to get out often for fresh air, and realized how important this is for our mental and physical well-being. It is not surprising that Realtors’ phones are ringing with Northerners looking to relocate to South Florida.
How do you evaluate where to live in a completely new state? This is where Realtors play an essential role in this relocation process.
Realtors are the homebuyers’ gateway to their new home. It is our job to get to know you and understand the lifestyle that works for you and your family. We need to educate the homeowner on the various cities and what each has to offer. So often we meet a buyer who starts out saying I “must” live near the beach but as we educate them on the options east, they quickly realize that they get much more house for the same price west and there are western communities with an easy, direct route to the beach. You can have it all if you make an informed decision. Looking for a golf club community but don’t want a large equity investment? Realtors can guide you to golf course communities that do not mandate membership making it an option not only for you but for a future buyer should you ever decide to move again.
It is a Realtor’s job to assist you in finding the right community and to protect you as you make your investment.
Providing walk through options for showings without a buyer physically having to be here to physically walk through is more important now than ever. As listing agents, we are adding the 360 tours, which allow potential buyers to “walk through” the home with the use of a mouse guiding the view as you virtually walk through the prospective home. For our buyers, if a particular property we are looking at does not offer at 360 tour – we are resourceful and utilizing technology to virtually walk you through all nooks of the home.
Partnering with the right Realtors is key to relocation.
Amy Snook, a 1990 graduate of the University of Maryland, is a partner in the All About Florida Homes team of Lang Realty, along with co-partner Noreen Payne of Delray Beach. She has been practicing real estate and title insurance for 17 years and is currently the Florida State Vice President for Women’s Council of Realtors. Amy is also a director of the Realtors Association of the Palm Beaches and Greater Fort Lauderdale and a director of Florida Realtors. She resides in Atlantis, Florida.
“Some buyers were waiting for the next recession, thinking home prices would fall again – but recessions aren’t created equal. The latest downturn exposed those myths.”- FloridaRealtors.orgBy: Russ Wiles
NEW YORK – The current economic downtown has been odd in so many ways. Why shouldn’t it expose some economic myths and misconceptions as unreliable, if not outright untrue?
When it comes to understanding the relationships involving home prices, bank deposits, interest rates and unemployment, many disconnects arise. Here are a few:
High unemployment and home prices
You might think that as the nation’s unemployment rate has spiked during this social-distancing recession, that would put pressure on home prices, forcing some owners to miss payments and discouraging buyers.
So far, that hasn’t been apparent. Home prices were up 2.5% on average this year through April, according to S&P CoreLogic Case-Shiller.
Low interest rates, which make homes more affordable, are one factor supporting prices. Also, stimulus and other government payments have enabled millions of Americans to meet their obligations. Plus, the economic slump has lasted only about four months so far, so the full impact may not have been felt yet. If the economy recovers strongly from here, negative housing fallout might not materialize in a big way.
Still, it does seem like the other shoe could drop. Fitch Ratings, the credit-rating agency, currently sees home prices nationally as 6.1% overvalued based on recent price increases, heightened unemployment and the possibility of lower incomes and rents. Values are most frothy in Nevada, Idaho, North Dakota, Texas and Arizona, Fitch said.
The degree to which housing might become more overvalued depends on the future path of unemployment and personal incomes, said Suzanne Mistretta, a Fitch senior director.
The company sees the U.S. unemployment rate easing to 7.8% next year from an average 10.3% in 2020. Though not approaching overvaluation levels of 20%-plus from 2005 to 2007, housing still could reach its highest level of overvaluation in a decade, Fitch warned.
Federal deficits and interest rates
Many people used to assume widening federal deficits would exert a crowding-out effect, pushing interest rates higher as the supply of debt mushroomed and private savings were siphoned from other investments. Few people seem to be focused on this connection anymore, given that interest rates keep dropping while Washington’s borrowing needs continue unabated.
One explanation for why the link doesn’t seem to work is the lack of inflation, as inflation and long-term interest rates tend to move together.
Another is the preference among investors for owning government bonds, which carry high credit ratings, during periods of heightened uncertainty. When things get tough, investors get nervous. They snap up government bonds with preservation of capital, not yield, as the primary goal.
As the Tax Foundation noted in a 2016 report, some economists had been suggesting that budget deficits reduce economic growth by boosting interest rates and diverting private saving toward the purchase of government debt. But in practice, “It has been hard to find an empirical link between deficits and increased interest rates or reduced investment,” the group concluded.
Rates are even lower, and deficits higher, today.
Low yields and deposit accounts
You would think that with bank deposit accounts, money-market mutual funds and other risk-averse instruments yielding next to nothing, investors would be ready to move their money elsewhere. But so far, millions of people are willing to accept virtually no yield so long as their assets remain safe.
Bank deposits spiked by $1.2 trillion in the first quarter, the most recent figure tracked by the Federal Deposit Insurance Corp. That was nearly four times the size of any other quarterly deposit gain over the past decade. Americans also have been flocking to money-market funds and other risk-averse instruments. Money-fund assets are up more than $1 trillion so far this year, reports Money Fund Intelligence newsletter.
It’s not like risky stock-market investments have been faring all that poorly. The broad market was up roughly 43% from its recent low in late March through July 9. But for a lot of people, safety reigns supreme – and they’re willing to pay a price for it, in low returns.
College graduates and layoffs
Before the recession, the vast majority of people with bachelor’s degrees who wanted jobs could get them. As recently as March, the national unemployment rate for college graduates was 2.5%. That was well below comparable figures for less-educated Americans, such as the 4.4% rate for people with only a high school diploma.
College graduates also typically earn more – $1,248 a week on average for holders of bachelor’s degrees only, compared with $746 for those with a high school diploma only, according to a May update by the Bureau of Labor Statistics.
However, that picture has changed a bit amid this coronavirus-induced economic slump. The unemployment rate for college grads more than tripled overnight to 8.4% in April and 7.4% in May before easing to 6.9% in June, according to the Department of Labor.
That’s still well below comparable rates for less-educated groups, such as the 12.1% June unemployment rate for high-school graduates. (The department also tracks workers based on whether they have some high school attainment and some college.)
Still, it lays to rest, at least temporarily, the notion that college graduates are immune from layoffs or other career bumps, especially amid an economic backdrop as strange as this one has been.
Saving money during recessions
You might think now would be a tough time to save money. During recessions and other periods of high unemployment, more people are financially stressed, the reasoning goes. It would be the time for many individuals to lean on their savings to help make ends meet.
That might be the case for a lot of people, but it certainly doesn’t tell the whole story. The nation’s savings rate often has climbed during recessions, and while real-time numbers aren’t available yet, that could be the case again.
Part of this might reflect a reluctance or lack of opportunity to spend money. Think how much you have saved in recent months by eating at home rather than at restaurants, not taking vacations and so on. Perhaps many people also are making a genuine effort to get their budgets under control by putting off various types of spending.
It’s not just individuals, either. A March survey of corporate finance officers conducted by the Association for Financial Professionals noted the largest increase in three years of businesses holding short-term investments at banks.
In our last market report, we shared that the effects of Covid 19 would be evident in the April results and as forecasted the drop was drastic. Closed statistics in Palm Beach County are down 30% year over year, new pending sales dropped 54.6% and new listings are down almost 40%.
However, Believe it or not, there IS good news.
As fast as we dropped, we are already in midst of a recovery – yes, that quickly. It is being referred to as a V-shaped Economic rebound – a quick drop and a quick rebound.
Over the past six weeks the market has been showing tremendous gains – Florida Realtors even reports that the activity and results are now back to early March levels which was a “hot” market. Listings (if priced right) are coming back on and selling as quickly as they come on due to low inventory. If you are even considering selling your home, now IS the time. Stage, Price it Right, Market it properly and get ready for activity – of course, as we have shared over the past few months – ensure that your photos allow clients to truly understand the home’s layout or include a 360 walk through.
So the market has quickly rebounded but does this mean things are all back to normal?
Frankly, it is simply too soon to know. The loss of jobs, the impact of borrowers ability to obtain loans as a result, tightening credit requirements, and the impact of forbearance agreements on future loans all may and most likely will impact the market – The recovery of the economy and the job market is critical to our country and to the real estate market.
A lot can happen over the next 30 days and as workers go back to work and communities open up we are optimistic and excited to see the May results in a few weeks!
– Amy & Noreen
While we analyze the market monthly and provide a report, this one is different and it is so essential that we all understand what is happening to the real estate market, as a result of Covid-19, so that we,together, can make educated decisions.
There is little doubt that Covid-19 and the shut down have impacted our Palm Beach County Real Estate but in what way and what to expect I believe will surprise most consumers.
The first quarter results are in and as many of you know, we were trending for a great year with year over year results showing improvements from last year – and March results showed the same improvement of Closed Sales, Median and Average Sales Prices up year over year. That may surprise many people but know that closed sales in March are a result of contracts from earlier in the year – Pre-Shutdown. March closed sales while up from February are at a much lower rate of growth from earlier in the year – so while they were closing, there were a percentage that simply did not close due to the uncertainty surrounding Covid-19, the financial impact, etc. The months of inventory over $1,000,000 is down to 13 months and if you will recall was almost 19 months just a few months ago. Did homes sell? Certainly but also we saw homes come off the market. $600,000 to $999,999 is a balanced market but 300,000 to $599,000 is now a sellers’ market. We do expect, of course, the April numbers to really reflect the effects of all that has been happening in our world. These numbers will be out in just two weeks.
This brings me to an important point of this 1st Quarter analysis and what to expect, in my humble opinion, moving forward. We have clients and prospects calling and asking is now the time to buy? Is now the time to sell? What drives the real estate market – two major factors are interest rates and inventory. For now the federal reserve is doing a good job keeping the interest rates low – while they are bouncing a bit – they are still very attractive for a new loan. Inventory overall is low – regardless of the price point and what happens when inventory is low? You will find the listing and sales prices are higher –
We are having to get creative in how we show property, we are capitalizing on all technological opportunities for listings from the photography to the 360 virtual tours – “showing” the home without having to physically show the home to every potential interested party. We are all operating efficiently and effectively and as a result homes are selling. In fact to homes that we listed in the past 30 days were under contract within days of being listed and at or close to list price!
So while we are living in these uncertain, scary times – it is essential that our economy recover – for all of our sakes and to be able to share with you all that homes are being listed, that home are selling and that our market is start to once again move is wonderful news that I am honored to share!
Noreen Payne, Chairman of the Delray Beach Chamber of Commerce, discusses what the Chamber is doing to help local businesses and how residents can help support non-profit organizations during these challenging times.
Working with Buyers in a Covid-19 Environment
By: Noreen Payne
Sitting at my desk and pondering the path forward during this time of social distancing and virtual work during Covid-19, I wonder how things will be different in our personal residential real estate business once we make it through these challenging times. But, for now, the focus is on how we continue to serve our buyers who are not only wanting to buy a home but also have to. Like many of our colleagues, we’re also looking at ways to conduct our business virtually. When it comes to our buyers, for now the days of picking them up in our cars and face-to-face interaction are on hold. Those of you who know me know I’m missing those personal moments immensely!
That said, I’m finding that using tools such as FaceTime, Zoom, App Files, Video and Virtual tours can also go a long way toward building a solid relationship. In fact, we’ve just closed on a new home purchase with a buyer who has never set foot in the home they just bought! Though this is the first time we’re weathering a pandemic, this isn’t the first time we’ve done this. Remote contact can be a common way for buyers to purchase, especially investors who trust us with their goals.
In the case of our recent close, we started in the classic Residential Real Estate fashion, doing what we do best. The fact-finding process, once done in person, can be handled via conference call. During the call I asked a lot of questions and did even more listening. Then I created the usual searches and shared them over email—after which came the usual back and forth feedback, mostly done via virtual tours, photos and a few FaceTime calls.
Working in this manner with our buyer, we actually found the perfect home in no time! I set the showing with the listing agent and luckily the home is vacant and on a SUPRA, therefore, no contact/no touch deemed necessary. Over FaceTime the buyers and I took our time going through every inch of the home, down to the street on which it’s located. We negotiated the deal and went under contract. At the time of inspection, I met the inspector, who we know very well. As a side note: It’s my firm belief that having trusted partners working with you at all times is a must! I unlocked the door for the inspector and reconvened with the client over FaceTime to give them the update. Obviously, many more things can happen prior to closing. In this case, we met General Contractors, interior designers, landscapers, plumbers, electricians, and more. It was a great help having an agent on the listing side who was incredibly accommodating and a pleasure to work with. In these days of Covid-19, our spirit of teamwork is being put to the test. Now more than ever, we’re all pulling together in the best interest of our clients to ensure smooth closings like this one.
In this time of uncertainty, my initial reaction was to withdraw—even marketing didn’t feel right. But, I believe these days the reality is that our clients now need our support more than ever (of course at a safe six-foot distance).
About Noreen Payne
Noreen Payne is a partner in the All About Florida Homes team of Lang Realty. She and her co-partner, Amy Snook, provide concierge-level real estate service in South Florida. She is currently Chairman of the Board for the Delray Beach Chamber of Commerce and is on the Board of Directors for The Achievement Center for Children & Families, and is an active volunteer with The Caring Kitchen.
1. My company’s offices are closed, and I am having a hard time providing my final verification of employment within the 10 days prior to loan closing.
FHA and RHS are allowing verbal verification of employment. Specifically, your employer can provide this by phone. RHS is also allowing email verification. If you cannot get either of these, the lender will require higher reserves to cover risk.
Fannie Mae and Freddie Mac will allow verbal verification when available and an email verification under certain conditions. They have also made other forms of temporary verification available in order to help with verification while social distancing
2.My lender indicated that the IRS has shut down and they cannot process loans without an income verification document that only the IRS can generate. Is this true?
Luckily, there is precedence for an IRS shutdown based on several recent government shutdowns. Some lenders may require this document, but Fannie Mae, Freddie Mac, and FHA do not so this is a lender overlay.
Fannie and Freddie both issued guidance in January 2019 following the previous government shutdown to note that they do not require the 4506T IRS tax transcripts at closing. Rather, they only require a request for the document be signed by the borrower. However, they do require the tax transcript be submitted as part of their post-closing review. NAR has asked both Fannie and Freddie to clarify and publish updated guidance given the unique challenges posed by COVID-19.
Furthermore, the IRS reopened this facility during the shutdown as it was deemed essential. We have reached out to the IRS on this point.
- I have heard that the FHA, Fannie Mae, and Freddie Mac have raised rates and fees on borrowers with lower credit scores or smaller down payments?
These claims are not true. To date, neither the FHA nor Fannie Mae and Freddie Mac have made any changes to credit scoring or down payment requirements. The only change they have made for borrowers is to allow MORE flexibility in how a lender can verify employment.
However, some individual lenders are adding their own, higher standards on these products. The rational is that the cost of servicing these loans has surged due to the widespread forbearance that is taxing servicers’ resources. Under forbearance, the servicer must continue to pay PITI to the investor, but the sheer volume of forbearance to deal with the COVID-19 response is unprecedented. Since lower-credit borrowers are more likely to take forbearance and servicing is harder to get, lenders are less willing to extend this credit regardless of the FHA or GSEs’ standards.
NAR sent a letter to the Treasury, Federal Reserve, and the Federal Housing Finance Agency requesting help for servicers dealing with the unprecedented demands on funds due to broad forbearance requests. Improving servicing is one key to improving the flow of funds to borrowers and homeowners.
Ginnie Mae has announced the creation of a new program, that should help alleviate lender concerns and improve access to mortgage financing. The program will provide cover for lenders by advancing them the money so they can make the required pass- through payments to investors during the forbearance period.