Everyone needs to do their part to stop the spread of the coronavirus. Right now, home is the safest place to be. Sheltering-in-place at home for an undetermined period will make for an ideal time to get some of those home projects done, which will leave you with plenty of free time after this all this blows over.
Just six months ago, we were living in an entirely different world. Even on Leap Day, Feb. 29th, all economic indicators were very strong. With the spread of COVID-19, those indicators will be quite different for March.
This week I had the privilege of listening to an interview entitled “This Too Shall Pass,” between Dr. Lawrence Yun, chief economist for the National Association of Realtors (NAR), and Brian Buffini, founder and chairman of Buffini and Company, a leading international real estate coaching and training company. They discussed the effect of COVID-19 on the real estate industry.
Buffini pointed out, “In this time of crisis, the one place that people had to go to for their safe haven was their home. Their homes became their shelter, their comfort, their lifeboat.”
Now, companies have quickly adapted to make their employees’ homes their places of business as well. Over the past weekend, Colorado Governor Jared Polis mandated that Colorado employers reduce employee density immediately, creating further urgency in transitioning to work-from-home. Now many people are discovering that it’s not only possible to work from home, but more preferable, and it will be interesting to see how many people continue to work from home when the crisis is over. In fact, Dr. Yun commented, “there will probably be so many new ‘work-from-homers’, they will all start looking for a new home that meets the needs of that new lifestyle.”
Working from home is just one of the various ways we’re social distancing. The more social distance we have, the more quickly this public health crisis will be over. In fact, if the coronavirus is contained shortly, Dr. Yun thinks that “real estate will bounce back quickly. The slowdown in spring buying might cause a spring-like surge in activity in August. The more buyers who delay a spring purchase will create pent up demand in the later part of the year.” Dr. Yun further explained that “real estate is staged to stay strong after the coronavirus crisis is over. The main reason is that there is still an inventory shortage across the country. Inventory remains short because the building industry needed to be building about 1.5 million homes a year just to keep up with population. For over a decade, the production level has only averaged about 1 million homes a year.”
Buffini said that, “the banking industry is a completely different place than before the recession of 2007 to 2012. During the eight years prior to the coronavirus crisis, lenders were making higher-quality mortgage loans, not the easy financing that created many problems during the recession. Prudent mortgage lending has prevented many people from getting in over their heads, making it easier for them to weather the storm. “
Dr. Yun elaborated that, “we are in a very accommodating monetary policy period. That means mortgage interest rates are likely to remain at an historic low, and maybe will even go lower. Most clients are attracted to low rates. Interest rates are more important than the loss of value in the stock market. Half of America doesn’t own stock and the stock market doesn’t affect them.” If one feels that their job is secure, and many jobs are, Dr. Yun advises to take advantage of the record-low mortgage rates. He also said, “Maybe there are less buyers out in the market during the crisis, which means there’s less competition and better price negotiation potential.”
In summary, Dr. Yun said, “It’s going to pass. This short-term coronavirus negative impact will pass… Even if it takes a little longer to contain it, there is such solid fundamentals for the real estate market, things will play out very well over the long haul. People who are planning for the future long term in real estate, they will do well.”
Buffini concluded with, “When you have a bit of a longer-term perspective, it seems to take you out of the short-term panic.”
By Duane Duggan. Duane has been a Realtor for RE/MAX of Boulder in Colorado since 1982 and has facilitated over 2,500 transactions over his career, the vast majority from repeat and referred clients. He has been awarded two of the highest honors bestowed by RE/MAX International: The Lifetime Achievement Award and the Circle of Legends Award. Living the life of a Realtor and being immersed in real estate led to the inception of his book, Realtor for Life. For questions, e-mail DuaneDuggan@boulderco.com, call 303.441.5611 or visit boulderco.com.