This post on the coronavirus impact on real estate sales here in Silicon Valley is updated periodically, depending on unfolding events, so please check back often. Bottom line: sales are down, but the market is heating up now that occupied homes may be shown again. We will have a better sense of the market’s footing by the end of May, since the ability to show occupied properties only began May 4th.
New cases of Coronavirus in SCC are falling
As of right now, May 11, there are 2339 diagnosed cases in Santa Clara County per the county health department’s website. We are averaging about 18 – 19 new cases per day (average of the last week’s worth of data). When we went into the lockdown, it was about the same rate, but had been inching up, while now we are creeping down. The number of hospitalized is also trending down. Check out the county’s website using that link for more info.
There are fewer new cases each week. However, the total numbers are still rising, so people should not get the idea that this is behind us. The opposite is true: we are the very early stages of dealing with the virus, which is likely to be an ongoing problem until we get a vaccine, herd immunity, or exceptionally good treatments which are widely available. The Shelter in Place has been effective in keeping our hospitals from becoming overwhelmed.
Things are loosening up a little bit
As of May 4, occupied homes can be shown as long as the seller is not present. This is a huge help. Sales fell significantly in April as compared to March (down 9.6%) since most listed homes could not be visited. The previous conditions do still apply, though: only 2 buyers + their 1 agent may be present (no kids, no friends, no parents) and the 2 buyers must already live in the same household. If it is 1 person purchasing the home, then only that one may see the property in person. We are to keep the social distance, of course.
Additionally, the PEAD form must be signed and emailed to the listing agent prior to the showing. As you can imagine, it is full of warnings about seeing homes during the pandemic, and that you should use masks, gloves, booties, etc. In some cases, the listing agents will provide them, but not always.
My sense is that May will be transitional and June more normal, but of course until there’s a vaccine, we’ll need to social distance (so no open houses), wear protective gear, and make most of the home buying work be virtual rather than in person. The cases have slowed, though, and that is encouraging.
The real estate market is warming back up. Notably, inventory is rising. There are 190 single family homes that have come on the market in Santa Clara County since May 4th, and as of this moment, there are 1035 single family homes on the market in this county. That’s a 22% jump in inventory in 7 days.
Real estate agents may ONLY see their home buyers in person during showings (not for a general home buying consultation, for reviewing disclosures, or writing offers). Realtors and other licensees may not see their home seller clients in person at all. No meetings of any kind are currently permitted.
During the Shelter in Place: Can real estate listings, showings, sales, and closings take place now?
The landscape for home sales is complicated and restricted, but far easier than it was prior to May 4th. Serious home buyers and sellers should be able to get their sales through now.
- Real estate agents in Santa Clara County may show homes, but this should be only after everything possible has been done virtually and as a “last resort” per the county
- Real estate agents may show up to 2 people who currently live in the same household, no more
- Paperwork must be signed by buyers before they can view a home (the PEAD advisory regarding the risks of being in a home at this time). Some brokerages are requiring both the PEAD and their own company’s paperwork, too.
Home sale challenges include these:
- open houses are not permitted
- agents should not be using paper fliers or business cards (worry about spreading the virus on paper)
- broker tours will not happen in person, but a licensee may do a live video tour during a specific time so that consumers and other agents can view the property virtually
- Many providers are doing double duty with kids at home and trying to work at the same time as home schooling for the first time. Some have brought elderly relatives home to live with them. Expect delays in paperwork, reports, etc. getting turned around.
- buyers may be reluctant to view any homes this time and have concerns about how long the virus might live on surfaces if exposed
Escrow challenges include these:
- There are a lot of related jobs that could be in a gray area: appraisers, home inspectors, photographers. OR, maybe they will all be seen as under the umbrella of real estate services. Even so, those providers may or may not want to work and be in public during this pandemic. Most, though, appear willing.
- Delays may also happen from any number of directions if people involved get sick themselves.
- Initially, some buyers wanted to cancel their contracts. This was not a big number, perhaps 15% of all sales here. There are many reasons: perhaps they cannot have inspections or an appraisal, perhaps they have seen the stock market fall (that is not a contingency), perhaps they are afraid of the virus. This is a bit of a mess. Attorneys may be busy.
- Title companies are operating, but doors are locked, most employees are working from home, and one must have an appointment to go inside the title company office.
- Our local MLS is suspending the accrual of “days on market” since homes cannot be seen now in many cases. I believe that ends as of May 17 – 18.
- There is now an addenda from the California association of Realtors to address closing and other delays due to Covid-19. Some companies may create their own similar addenda for the coronavirus escrow complications and delays as they won’t like the language in the CAR form. There’s also a listing agreement addenda regarding the risks of having visitors into the home.
What should home buyers or sellers do with this concern about the Covid-19 virus now?
Right this moment, the clouds are lifting and it is possible to buy or sell a property. If we get a “second wave” of the virus, we could have a new round of quarantine, and it could be stricter than the first one if the wave is also bigger. I would not assume that we are done working around the pandemic until there’s a vaccine, successful treatment, and / or herd immunity.
BUYERS: If you want to buy, if you haven’t done it already, now is a good time to pull your paperwork together for a pre-approval, or better yet, to get it pre-underwritten, which does take time. Submit your taxes sooner rather than later so your lender has one less issue. Interest rates are incredibly low. If you want to buy in 2020, I would not wait.
SELLERS: If you want to sell, now’s a good time to do the hire an agent and get going on everything. There’s a summertime window of opportunity and we do not know how long it will last.
After the Shelter in Place is lifted, what is likely to happen
Once we are through this period of the Shelter in Place order, which I think may be June 1st or so, there will be some challenges that linger for awhile.
It’s possible (I believe this will be the case) that we may cycle through periods of home quarantine and more freedom between now and when a vaccine is available.
Social distancing will probably be a new normal until new antiviral treatments are ready and vaccines are in use (12-18 months from now or later for the vaccines?). Another big help will be having the antibody test, so folks will know if they’ve already had it (and hopefully cannot get it again).
Overall coronavirus impact on real estate sales:
- Home sales will likely slow as we go through the peak of the pandemic, and there’s a good chance that prices may fall. However, if Silicon Valley sellers hold off on selling but the demand by home buyers is continuing, prices could rise locally.
- Open houses are unlikely to resume until the virus is under control.
- Some buyers, sellers, Realtors, and others relevant to buying and selling homes will be continuing to have restrictions due to age or chronic health conditions, so I believe that we will not have everyone jumping back into the market at once.
- With many getting sick, loans and appraisals may be far slower. Escrows may be delayed and generally take longer.
- Home buyers or sellers may do more contract and disclosure reviews with their agents by Skype or other similar services just to keep exposure risks down. Phone calls may take the place of in-person meetings.
- Agents will be less physically present, not attending meetings where they could avoid going, such as the signoff. In some states, agents do not attend inspections. Could that happen here?
- Some will try to wait it out and put off selling or buying for a couple of years, until there’s a vaccine and it’s in wide use.
- Others will proceed with buying and selling, mostly cautiously, until the virus threat is tamed.
- Turnkey homes will be highly prized, even more than usual, since home buyers won’t want a lot of contractors coming into their homes at this time.
- Some buyers may be scared to look, especially if there have been a lot of people through the home.
- Some home buyers will press ahead, and will benefit from incredibly low interest rates.
- Buyers and their Realtors will be driving separately (for the sake of social distancing).
- Home buyers will be watching the stock market and may be shut out with these historic falling values if their down payments are not in cash.
- I wonder if buyers will look to buy larger homes since they know they could have to self isolate again in the future? Having more space is helpful.
- Costs: interest rates may go down if buyers pull back. Remember, you buy a loan product, you don’t just get a loan. Loans are like any other product in terms of the price charged relating to supply and demand. If the demand sinks, the price (interest rate, fees, etc.) will likely sink, too.
- Some sellers may wait until the virus is in the rear view mirror before wanting to put their occupied home on the market.
- Some sellers may treat their houses like multifamily homes, in which bidders get into contract before they see the interior of the home. (Those are offers subject to inspection.) Sellers or agents may provide video walk throughs, floor plans, or other ways of seeing the home without being there in person.
- Cash offers may be even more preferred as offers with loans go a little slower and create more uncertainty.
Long term ramifications of the coronavirus impact on real estate sales
Some events in our shared experience are so profound that they leave a lasting impact on those who lived through them. My grandparents were frugal as a result of living through the great depression. Many of us prepare for earthquakes better since experiencing the Loma Prieta and Northridge quakes. We no longer go through airports the same after 9/11. The emphasis after all was safety.
I believe that this is such a time and that the impact will be felt going forward. Safety precautions will be more prominent, just as they are more important now for earthquake preparedness and airline safety post 9/11.
Once there are antiviral treatments for this pandemic, people will relax a little, knowing that the worst complications can be averted. Once there’s a vaccine, most fears will ebb.
Until there’s a vaccine, I believe that the current pandemic is going to create permanent change in the way we conduct real estate sales here in Silicon Valley. A lot more will be done online, electronically. Meetings that used to be face to face will probably shift to video calls or regular phone calls.
We will be OK, we will get through this. Homes will sell again, if after a bit of a delay or a little different of a process. My own feeling is optimistic. We got through crisis periods with the Loma Prieta Earthquake (I did my final walkthrough on my first house 2 hours before it hit – we closed about 10-14 days later, but did close!), 9/11, etc. Things that we cannot anticipate happen. We work with what we have. Right now, we are fortunate to have so much of what we do be online. It would have been a different story had this happened in the 1980s!
I want to thank all of you who are complying with the shelter in place order, and a double thanks to all of you who are doing so cheerfully.
I want to thank all of the first responders, those who work in medical care in any capacity, and all who are working through this time to bring us our mail, deliveries, and enabling the most essential items like getting food and medicines during a time when they’d probably rather be sheltering at home and away from the public themselves.
I’d like to thank leaders everywhere, in government, business, and medicine, for being forward looking to get ahead of the curve so we can collectively have a better outlook.
Please stay well, one and all!