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NAR Report: How home sellers are shifting in COVID-19

(REAL ESTATE BIG DATA) Why, where, and how people are selling their homes in the pandemic is shifting. Take a look at NAR’s new report on what’s trending for home sellers.

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House sellers prepping home with For Sale sign out front

As the era of COVID-19 dawned earlier this year, everything in the real estate business seemed to change almost overnight, including the business of being home sellers.

To identify how the pandemic is affecting residential real estate, the National Association of Realtors added a section to their “2020 Profile of Home Buyers and Sellers” that looks at how the data is shifting. NAR pulled out data on primary home sellers who closed from July, 2019, through March, 2020, compared with those who closed from April through June, 2020.

That means the pandemic dataset is based on just 3 months – likely not long enough to call something a major trend but long enough to get an idea of where things are likely to go.

Here are some trend takeaways based on up and down swings in percentages.

More sellers want more space.

People who sold primarily because they wanted bigger houses climbed 5 points to 18%, tying with the former top category of people who sold to move closer to family/friends. The quest for more space tracks with NAR’s survey of home buyers, more of whom wanted homes suitable for multiple generations to spend time with or take care of older parents or relatives.

Not evident in the buyers report is a desire for home offices as more people are able to work remotely, but that’s likely a factor for both buyers and sellers. In fact, work-related reasons for selling – job relocation and shortening commutes – declined by a combined 5 points.

On the flip side of space, people selling because their home was too large moved up a point to tie with family changes like birth of a child or marriage/divorce, which moved down by 3 points. Both are in the second spot at 11%.

Life changes were also reflected in health and financial reasons. There was a 3-point climb in people selling because their health had made the home too difficult to keep up or it had become too expensive. It’s worth noting that 3 months into the pandemic would cover the beginning of the economic impact, and this reason is likely to grow.

Primary Reason to Sell Home before and during COVID-19

Sellers are feeling a growing sense of urgency.

By the end of June, concern over money hadn’t resulted in a wave of people needing to sell quickly. However, sellers who said they felt some urgency, but not the need to sell right away, climbed by 7 points. Those who felt they could wait for the right offer answered that with a 7-point drop.

Seller Urgency before and during COVID-19

The suburbs are hot. Small towns are not.

Suburban sellers were up 8 points, to 56%. Sales in urban areas/city centers increased slightly, but sales in small towns dropped 4 points. Rural areas showed an even greater decline of 6 points.

Numbers on buyers track that breakdown, with 57 percent of buyers reporting purchasing in suburbs/subdivisions, a 7-point climb. Urban areas/central cities were up by 2. Small towns were down 7, with a 2-point drop off for rural areas.

We’ve been reading for months now that pandemic-era buyers, especially those who can work remotely, are fleeing cities for suburbs and small, rural towns in the quest for more space, lower costs, and fewer people. NAR’s numbers may bear that out for suburbs, but not so much for small towns and rural areas – yet.

Location of Home Sold, before and during COVID-19

MLS listings and virtual tours got a boost. Open houses took a dive.

When it comes to how agents market properties, the big story is the rise of technology. While open houses fell by 12 points as concerns about exposure to the virus grew, virtual tours and video climbed by a combined 16 points. They still took a spot toward the bottom of marketing tools, however. Buyers are touring fewer houses, and virtual tours and videos will only gain in importance as marketing tools – suggesting agents and brokerages may have some catching up to do. (NAR has some ideas for that, too.)

MLS still reigns supreme, however. It even gained a little power as the percentage of sellers who listed their home on MLS grew by 6 points.

Methods real estate agents used to market homes before and after COVID-19

More incentives are on the table.

The percentage of sellers who offered no incentives to buyers declined 8 points, from 69% to 62%, suggesting more pandemic-era sellers are doing more to attract buyers. The percentage of sellers who sweetened the deal went from 31% to 38%, a 7-point hike. Home warranty policies and credit toward remodeling or repairs showed the most gains, at 5 points each. Sellers who offered no incentives were down 7 points.

Sellers tended to make more money as prices and equity increased.

The median number of years sellers had been in their home – 11 – stayed the same, but sellers who had lived there 21 years or more were up 6 points. Sale prices vs. purchase prices typically climbed 2 points: from $64,000, or 35%, to $80,000, or 37%. Homes in general got more expensive, with the median price moving from $270,700 to $300,000, but it was the $500,000+ homes that saw the most growth, with a 10 point rise. Not changing much: Sellers are still getting 99% to 98% of asking price.

Price of Home Sold before and during COVID-19

It’s looking like residential real estate is trending toward growth rather than taking a hit from the pandemic, at least in most markets. For real estate pros, monitoring pandemic-era trends will be key to refining marketing strategies, identifying underserved niches and, especially, finding likely sellers.

Lisa Wyatt Roe is an Austin writer and editor whose work has been featured on CNN.com/Travel, in Texas Parks & Wildlife Magazine and in the book “Seduced by Sound: Austin; 100 Musicians on Why They Make Music.” Travel and live music feed her soul. Volunteering with refugees feeds her sense of purpose. And making friends laugh feeds her deep (yet possibly sad) need to get all the laughing emojis on Facebook.

Real Estate Big Data

Housing market: Is it a bubble, or not?

(REAL ESTATE BIG DATA) There’s a lot of talk about whether or not the current housing market is a bubble. Let’s unpack both sides of the debate.

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Woman and man discussing the housing market earnestly, while holding a notebook

The housing market is crazy right now, with some attributing soaring prices to business as usual and others warning that those same prices are indicative of a bubble—one that, some fear, is close to bursting and triggering another recession. Whether you’re looking to buy or you’re simply window-shopping, here are some valid arguments for both sides of the issue.

A common argument for the existence of a housing bubble includes the issue of rising housing costs, with experts pointing to a strong upward trend in house prices as proof of an invariable crisis. On paper, this is an argument that makes sense since it mirrors the events leading up to the crash of 2006.

However, the reason the market crashed in 2006 has less to do with high prices and more to do with an abundance in risky loans and high interest rates—two things that don’t exist in today’s market. Adjustable rates are also virtually nonexistent for mortgages issued in 2021 (according to Bloomberg, only 0.1% of those mortgages allowed for interest adjustments) while around 60% of mortgages awarded in 2006 carried adjustable interest.

Bloomberg also points out that, between the aforementioned price hikes and common demand, most homeowners are situated to sell at a profit these days. This helps prevent the foreclosure issues evident in the crash of 2006.

Combine a high demand for homes and a relatively short supply of them (in comparison to decades past), and the market seems pretty tight for now—certainly not attributes one would expect leading up to a housing crisis.

But that isn’t to say that there isn’t cause for concern; there are a few reasons why the current housing environment could collapse.

Firstly, while it isn’t fair to compare current prices to their 2006 counterparts, it is fair to point out that the market will eventually hit a ceiling—something that often precedes a crash. Markets fluctuate all the time, but real estate tends to do so more slowly and over longer periods of time—and the market has been rising for long enough that a crash seems inevitable. It isn’t entirely out of the realm of feasibility to be worried about that.

Banks are also starting to invest in cryptocurrency, and, as the primary financiers of real estate endeavors, that could bode really poorly for people looking to get loans should the (very real) cryptocurrency bubble burst. Banks like Goldman Sachs have hired crypto investment specialists to avoid such a catastrophe, but the fact remains that cryptocurrency is still a wildcard—and, in a market that craves stability, that’s a problem.

On a different note, Finimize pointed out that JPMorgan reported an anticipatory drop in earnings from trading during the current quarter, which could also be an ill omen: If trading is slowing down, it could preempt another crash.

Frankly, this could go either way and nobody would be terribly surprised. While it does seem like the market is stable enough to prevent a catastrophe of 2006 proportions, you won’t catch anyone making fun of you for preparing for a drop in the near future.

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Real Estate Big Data

Are you selling real estate in a high-cancer-risk area?

(BIG DATA) If you own a brokerage knowing your local ecosystem can be beneficial. Whether it’s a humble brag on your blog, or a letter to a local rep, knowing your environment is always a good idea.

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Check your housing environment for cancer risk and support your area.

As a realtor or brokerage owner, you know the importance of understanding your community’s ecosystem in order to shape your business strategy.

However, have you considered how environmental and quality may play a role in those decisions?

This study published in Cancer suggests that you should. According to the study, “of every 100,000 Americans, 451 of us will get cancer in a given year.” The study “found a difference of 39 cases (per 100,000) people, between areas with the highest and the lowest environmental quality.

This establishes a significant link between environmental qualities and cancer risks.

The study also showcases a map of the US and the air quality of various regions. Red and orange areas have the worst air quality, while blue and green areas have the best air quality. As you might expect, large metropolitan areas have the worst air quality, and things improve as you move into more rural areas. You do find the most exceptions throughout the southeastern region and a vertical stretch that runs from the tip of Texas to the Dakotas up north.

These kinds of signs can either be a major benefit or a major obstacle to attracting buyers to your real estate market.

According to the most recent Gallup polls, 47% of Americans worry a great deal about the quality of the environment. So, how do you adjust?

If you’re in a blue or green area, make sure to get the word out! People now consider environmental quality as part of the quality of life factor. Don’t let that benefit go unnoticed. Blog about it on your own website. Use your social media to share data like this from other sources, or other information praising the environmental quality and protections of your market.

Integrate it into your marketing materials where possible.

If you’re in a red or orange area, you’ve got a bit more work to do here, and it’s going to get a bit political. There is already plenty of concern about attempts at the federal level to handicap agencies dedicated to protecting the environment. Be wary of such measures at the state and city level, and be a voice for the real estate economy in shaping this policy.

Does going to places of legislative businesses give you the heebie-jeebies? Find local organizations dedicated to improving environmental quality. Sponsor a river or park clean up event. Show your support for events like Earth Day. Don’t have those kinds of events? Harness your entrepreneurial spirit and bring these events to your community. Taking action as a community leader will be massively beneficial for your brand.

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Real Estate Big Data

How a COVID-19 vaccine could upend the housing market (again)

(REAL ESTATE BIG DATA) COVID-19 completely changed the trajectory of the housing market, but the promise of a vaccine could pull it back around in another direction.

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A house at dusk with lights illuminated, favored by housing market.

According to CNN Business, “the coronavirus pandemic dramatically changed the landscape of the housing market.” In many expensive urban housing markets, such as Manhattan and San Francisco, vacancy rates are high as people are moving to the suburbs; rents are low in these markets because workers are free from their office jobs.

When combined with low interest rates, this is putting a higher demand on homes in less populated markets. Many people are watching the real estate market closely as vaccines on the horizon promise a return to normal. How could the housing market be affected?

Homeowners still want to work from home to enjoy their sanctuary

The coronavirus reminded people how important home life was. Working from home eliminated commutes and gave workers back some of their time. Even with all the complications of working from home, buyers are looking for homes with a big backyard and space for a home office.

In the Dallas market, starter homes are high in demand. In urban markets that are more expensive, second homes in the rural areas are popular.

People should return to urban areas

As the vaccine gives Americans a return to normal, people will return to the big cities. CNN Business reports that the vacancy rate in Manhattan is 6.14%. Median rental prices are down almost 15% over last year.

As the pandemic comes to an end, it may be a renter’s market until the Fortune 500 companies bring people back to work. A vaccine could also lead to non-US buyers returning to the market, which would make the market more stable.

The vaccine could reverse mortgage rates

Some economists believe that the interest rates will continue to decline, but others suggest that a vaccine could switch the trend. Even so, Marketwatch predicts that many homeowners will still refinance as rates go. Homes will still be in demand, leading to a surge in the housing market.

In fact, a vaccine could mean that more homes will go on the market. Homeowners who hunkered down to ride out the pandemic could be more willing to host open houses and make a move themselves. A vaccine could contribute to supply, which will help buyers get better deals.

The Austin market is strong

Residential sales in the Austin area have increased by 31.5% over last year. Prices have also surged. The median price of a home in Austin’s city limits was $435,000 in August. Sales are expected to slow as supply dwindles. Inventory is limited because people are choosing to stay in their homes. Competition for homes on the market is high, driving prices even higher.

A vaccine is promising for the real estate market

A vaccine should even out the market, but without a crystal ball, it’s hard to know what will happen. Record sales in the Texas market certainly weren’t predicted to be an outcome of a pandemic. It will take time for the economy to level out and for people to get back to work in the entertainment and restaurant industry. How the vaccine impacts the market may depend on location, just as it always has.

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