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How coronavirus reshapes local residential real estate

Steve Poltorzycki, an Arlington resident writes about what he sells -- local real estate. This column reflects his fact-based views at the time of publication in a rapidly changing news environment. 

Steve 300 52619

Spring is typically the time of year when the real estate market reaches its peak after being relatively quiet over the winter. By mid-March, the spring market is usually in full swing.

But, as we all know all too well, mid-March is exactly when much of the nation went on virtual lockdown because of the Covid-19 pandemic. So how has Covid-19 affected the Massachusetts residential real estate market, and how has the real estate sector responded to the challenge?

The inventory of homes on market began to shrink toward the end of March and will likely continue to shrink in the short term. Interest rates are low, and buyers are still buying, with closings numbering at just about typical seasonal levels. Transactions, from open house to closing, have become largely virtual, though many buyers are still taking a look at what they are buying before committing. Prices keep going up, suggesting underlying market strength that could manifest itself after the current health crisis is over.

Supply has begun to shrink

New Listing

The pace of new listings coming on market in the first three weeks of March 2020 was very much in line with the situation during the same period in 2019. But in the fourth week of March 2020, new listings tumbled by 53 percent as compared with the fourth week of March 2019.

In my past Arlington real estate market reports, I have based my observations on Arlington-specific data. But the sample size for week over week Arlington data is just too small on which to base conclusions. Accordingly, I have relied on Massachusetts-wide data on the assumption that Covid-19 affects real estate markets everywhere in Massachusetts in a similar way.

For what it’s worth, usually about seven Arlington single-family homes get listed for sale each week in March, and that was true for the first three weeks of 2020. But in the fourth week of March, no Arlington single-family homes were listed.

Some sellers have become reluctant to put their homes on the market. Sellers are understandably concerned about prospective buyers coming into their homes, potentially bringing infection with them. And then there’s the general uncertainty about the shape of the current economy, which creates the perception that there will be fewer buyers, and therefore a softer market.

Sellers are also typically buyers. They need somewhere to go after they sell. Like other buyers, they are concerned about leaving their homes except for essential trips to buy groceries and medications. House hunting doesn’t necessarily feel essential right now. So many sellers have decided to hunker down and wait until the crisis is past before listing their homes or looking for the next one. On the other hand, sellers who are in a must sell situation are still listing their homes and finding a market for them.

Sellers who already had homes on the market when the pandemic crisis began to heat up faced the decision whether to keep offering them. There are still buyers out there, and homes on the market are selling. Still, there’s the concern about bringing infection into the house by opening it up to potential buyers and a concern that there may be fewer buyers out house hunting.

Canceled/withdrawn

In the end, a significant number of sellers have either canceled listings or temporarily withdrawn their homes from the market.

The 1,610 homes taken off the market in March 2020 was about triple the number taken off the market in March 2019 (547). To put this into perspective, as of March 28, 2020, there were 9,914 homes still on the market, so the 1,610 taken off the market roughly corresponds to a 14-percent reduction in inventory over the course of the month.

Again, not to put too much stock into Arlington-specific data, but eight homes were taken off the market in March 2020 versus one in March 2019.

No doubt the sellers who have withdrawn their homes from the market are looking to put their homes back on the market once the pandemic is behind us and buyer confidence returns. This will provide some of the supply that will be needed to meet the pent-up buyer demand.

Buyers are still buying

Supply is diminishing, but what about demand? Until the last week of March, the number of closings in March 2020 was pretty much in line with what it was during the same period in 2019.

Sold-MASS.

Closings are a lagging measure of demand, as closings usually happen four to six weeks after an offer has been accepted. Closings are more a measure of what demand was about a month ago. And closings and the recording of deeds can be done remotely. There is no need to go to a lawyer’s office or the Registry of Deeds to make a closing happen.

So it stands to reason that closings appear to be largely unaffected by the pandemic – that is, until the last week of March, when there was a drop in the number of closings compared to the same week in 2019. It is not clear why. Perhaps some closings were delayed to give the Registry of Deeds in some counties time to transition to a full remote deed-recording capability. The next few weeks might provide some more insight into what is going on.

A much more current measure of demand is the number of properties that went pending (under agreement). Properties typically go under agreement a week or so after an offer has been accepted.

Went pending (under agreement)

March 2020 looked to be in line with March 2019 until the fourth week (a now familiar observation), when the statewide number dropped to about half of what it was during the same period in 2019. It’s possible that this simply reflected the temporary reduction in supply caused by some sellers taking their homes off the market. Or it could reflect a true decrease in demand.

Those of us on the real estate front lines have certainly seen some buyers who have deferred their house hunting until the crisis is past. They are understandably reluctant to brave open houses where social distancing may or may not be enforced. And even when real estate agents host virtual open houses, most buyers will not make an offer for a house they have not seen in person, and an in-person viewing entails some risk.

And even if buyers are willing to go see houses, there are now far fewer in-person open houses being hosted. And in many cases it’s harder to obtain a private showing as well. Sellers are imposing restrictions on the kinds of buyers they will let see their houses, in some cases requiring proof of mortgage prequalification and restricting access to decision-makers only.

On top of this, there’s financial uncertainty. People are losing their jobs or are worried about losing their jobs. People’s portfolios have taken a hit. It is no surprise that some potential buyers are inclined to wait things out until the financial outlook becomes clearer. Nevertheless, there are many buyers with a high level of confidence in their job security who need housing and are encouraged by the very low prevailing mortgage rates (3.5% for a 30-year fixed mortgage).

One caveat to be noted about mortgage availability is that some lenders have scaled back on some of their mortgage lending. The states of emergency declared by the federal government and the Commonwealth of Massachusetts have carried with them relief for mortgage borrowers suspending the need to make mortgage payments for 60 or 90 days. Good news for borrowers, bad news for lenders. As a result, some lenders are restricting, eliminating or jacking up the interest rates for certain types of loans (jumbo, condo, “portfolio”), imposing heightened requirements to qualify for loans (higher credit scores, proof of sufficient liquid assets to close) or deferring rate locks. These practices have not yet become prevalent, so potential borrowers should check with their lending institutions to see what their current policies are.

Prices keep going up

It takes some time before changes in supply or demand are reflected in house prices. Like data associated with closings, house prices are a lagging indicator of the current situation, reflecting agreements made between sellers and buyers four to six weeks before closing. But sales prices are still an indication of what the fundamentals of the real estate market were before the current health crisis, and therefore what the market could revert to once the crisis is past.

Media price: single family, condo

Massachusetts single-family median prices in March 2020 were up $20,000 over March 2019, a 5-percent increase, and condo prices were up $46,000 over 2019, a 12-percent increase.

Media price, Arlington: single family, condo

A similar situation could be seen here. Arlington single-family prices in March 2020 were up $44,000 over March 2019, a 5-percent increase, and condo prices were up $52,000 over March 2019, an 8-percent increase.

Despite the factors keeping some buyers hunkered down, waiting things out, there are still plenty of buyers out there who want to buy house, and with inventory likely to continue decreasing in the short term, it stands to reason that prices will either hold level or keep going up.

Things have gone virtual

The state has deemed real estate not an “essential service,” so all real estate offices are closed and client interactions are largely through remote technology. Most other aspects of real estate transactions are being conducted remotely or with social distancing in mind.

In Boston, Mayor Walsh has ordered that real estate open houses not take place. In Medford, Mayor Lungo-Koehn has done likewise. [Per Town Manager Adam Chapdelaine, on April 1, Arlington now has the same restriction.] In other parts of the state, if there is no local mandate as there is in Boston, real estate agents are following Gov. Baker’s guidance, which permits open houses and showings, so long as social distancing is practiced.

Most real estate brokerages are discouraging their agents from hosting in-person open houses, and the majority of homes coming on market recently have not offered in-person open houses. Nevertheless, some in-person open houses are still taking place, with agents enforcing social-distancing practices, such as limiting the number of visitors to a house to five at a time and requiring them to wear disposable booties and gloves (which they must take with them for disposal when they leave). Where gloves are not provided, visitors are provided with disinfectant wipes and hand sanitizer and asked to wipe down any surfaces they touch. It is not unusual for agents to require visitors to fill out a questionnaire that asks whether they are experiencing any of the symptoms associated with Covid-19 or whether (and to where) they have traveled recently.

Where in-person open houses are still taking place, reports are that traffic is light. Buyers are concerned about being in close proximity to others. Only very motivated buyers are showing up. It’s not time for tire-kickers to be out and about. 

Real estate agents have pivoted very quickly to offering virtual open houses, using Zoom, Facebook Live, Skype or other similar platforms. A video feed is sent out in real time incorporating the ability of prospective buyers or agents to ask questions about what is shown, which are then answered by the showing agent in real time. And where live virtual open houses are not conducted, agents are offering prerecorded video virtual tours and 3-D tours (simulations of video tours by stitching together multiple still photos).

Private showings, unless banned

Live private showings are still being held, except if, as in the case of Medford, local authorities ban all in-person showings. Agents are following such procedures as maintaining social distancing and restricting access to prequalified buyers, decision-makers only and those stating that they are not exhibiting symptoms typical of Covid-19 or have traveled recently.

In some cases, sellers have moved out of their houses to not be worried about coming back to a house after others have been in it.

Photographers are requesting that no one be in the home when they do their work, and that all lights be turned on, all doors open and blinds or curtains be open. They will not move any items in or around the house.

Home inspections are still taking place, with home inspectors wearing disposable gloves and booties and wearing masks if requested by the homeowner. Some inspectors will perform the inspections only if no one else is in the house. They are providing video footage of their inspections so that buyer clients can follow along. Other inspectors are allowing clients and buyer agents to be present, but request that attendees at the inspection be kept to a minimum, that social distancing be practiced, and that attendees wear masks and disposable gloves and booties. Bank appraisals are being conducted under similar protocols.

By executive order of Gov. Baker, a state of emergency has been declared and an executive order issued deferring smoke detector and CO alarm inspections for 90 days after the state of emergency is lifted. It is now the buyer’s responsibility to ensure that the property that the buyer is purchasing is properly equipped with approved smoke detectors and CO alarms when they take title.

Closings are taking place virtually, and purchase-and-sale agreements are drafted with addenda to provide flexibility in closing dates related to changing circumstances brought about by Covid-19.

What’s in store for real estate in the coming months?

The real estate sector has adapted to a rapidly changing situation and taken a number of steps to address health concerns and make sure that transactions can go forward. In such a fluid situation where major developments happen almost daily, it’s hard to make predictions. It’s not at all clear where things are going, but it’s fair to say that in the short term some buyers and sellers will be sitting things out until the corner has turned on the pandemic.

But there will still be many sellers who will have to or want to sell, and buyers who want to or have to buy and transactions will continue to take place. There is no sign that prices will be affected, so we can expect them to either stay level or keep going up. And once the health threat is past and the economy is back on track (fingers crossed!), so will be the real estate market.

If you have any comments or questions on this or any other real estate-related matter, please This email address is being protected from spambots. You need JavaScript enabled to view it.. I'd love to hear from you.

Real estate

 Data were collected from MLS PIN, National Association of Realtors, Massachusetts Association of Realtors, Great Boston Association of Realtors,US Bureau of Labor Statistics (BLS), US Bureau of Economic Analysis (BEA), Freddie Mac, and Conference Board Consumer Confidence Survey. Data do not reflect private transactions. Berkshire Hathaway Home Services Commonwealth Real Estate and its sales agents make no representation as to the accuracy of the data and are not responsible for any actions taken as a result of use of or reliance on this information.


This column of information by Steve Poltorzycki was published Thursday, April 2, 2020. He is a Realtor with Berkshire Hathaway HomeServices Commonwealth Real Estate. Email him at steve at stevepolt.com if you would like to receive his real estate newsletter and see his website >> 

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