Although it is too early to tell how the global pandemic of 2020 will impact the United States housing market --- Valley housing experts are no more certain than others --- but Arizona real estate experts contend heading into uncertain financial waters the Phoenix metropolitan housing market is well-positioned to weather the storm.
“It is very early in this process,” said Mark Stapp, executive director at The Center for Real Estate Theory and Practice at the W.P. Carey School of Business at Arizona State University.
“Only in the last two weeks has there been any data to show any profound effect. You are starting to see Escrows cancel --- We have about 30 days to see how this is going to play out here. The reality here is it is going to have profound impacts. It will pull things up short for quite a while. How long this lasts and the financial ramification and how the federal government deals with it will play a major role.”
Mr. Stapp admits you can come up with some worst-case scenarios pretty easily.
“Interestingly enough going into this was how good the market was. We started out the year looking like this was going to be a fantastic year,” he said of population growth coupled with limited single-family and multifamily residential housing supply.
“But this is much different than going into the last recession as we are going into this recession with very little inventory as compared to the last recession when we were very overbuilt. That is going to bode well because we are not going to have that huge overhang of inventory like we had before.”
Before the COVID-19 pandemic took hold in the United States, Phoenix housing --- and commercial data points --- suggested a healthy marketplace with bright days ahead.
Mr. Stapp explains the greater Phoenix housing market is not at a complete standstill.
“It is not a complete shutdown, but the agents I have spoken to say they are beginning to see cancellations,” he said. “We are talking to a few different Realtors and it is almost one in four that are closing.”
An early casualty of the local housing market? The rental in all its variations.
“Normally you would say that section would be in the best shape: that would be rentals,” he said. “But with people losing their jobs at unprecedented rates the question quickly becomes, ‘who we will rent?’”
Mr. Stapp points out a lack of rent-paying inhabitants can have a disastrous impact on the overall marketplace.
“Now we run the risk of a really significant financial disaster,” he said of underlying economic concerns. “It is going to come down to the level of empathy from landlords and from lenders, in particular.”
Mr. Stapp also offers the perspective that much of the rental marketplace accounts for a significant amount of the overall housing marketplace in the Phoenix metropolitan area.
“The growth of the single-family market buys by institutional buyers followed by the ibuyers and the advent of the single-family, short-term rental market: those three things together were consuming a lot of inventory making the inventory tight,” he explained.
“What happens when those stop? A lot of people will be unable to sell or rent those homes. These are things that are going to happen over the next few weeks.”
Scottsdale Realtor Gary Shapiro reminds the sun is still shining all around the state of Arizona.
“The protocols for our industry are evolving and changing daily,” he said.
“For example, lenders are relaxing requirements for formal appraisals and accepting drive-by or desktop appraisals. Home inspectors are limiting their access to homes without the buyer and their agent accompanying them during the inspection. Title and escrow people are doing more mobile signing of documents and limiting face-to-face appointments where possible. All of us are taking advantage of technology when it makes sense.”
Mr. Shapiro has been selling homes for more than 40 years, is a premier broker at Coldwell Banker and has earned the coveted Realtor emeritus status from the National Association of Realtors.
It is too early to tell as any theories gleaned from data today of what is to come are incomplete, Mr. Shapiro says.
“Everyone is adjusting to the new realities,” he said. “I’m being sensitive to my client’s and prospective client’s concerns and comfort levels. We’re practicing safe distancing and respecting their individual needs.”
--- Gary Shapiro
But the show must go on, Mr. Shapiro contends.
“Home buying and selling will not stop. Historically speaking, our markets are among the first to recover from downturns and disasters, etc., and we generally enjoy a robust recovery,” he said.
“There is a realization that we’re all in this together and the current situation requires cooperation and respect for one another. Each day, we’re getting closer to returning to what we will be our new long-term habits and practices. There’s light at the end of the tunnel.”
Scottsdale Area Association of Realtors CEO Rebecca Grossman contends predications abound but few facts are understood.
“There are plenty of predictions, but few facts right now to substantiate or debunk them,” she said.
“Some of the most likely changes to the real industry will be an acceleration of virtual technologies such as Remote Online Notarization, which was slated to start in Arizona on July 1 of this year, but could be moved up per the bipartisan federal bill: SECURE Notarization Act of 2020. Virtual showings have been a ‘thing’ for some time and are becoming increasingly more popular given the circumstances.”
--- Rebecca Grossman
But one thing is for sure, Ms. Grossman says, is population growth will subside during the time of the novel coronavirus.
“Another prediction includes a temporary reduction of inbound migration from states like California,” she said. “However, as working-from-home becomes the even-newer normal, we could actually see a future boon in relocation here as more employees are untethered from their offices and higher real estate prices outside of Arizona.”
Scottsdale Area Association of Realtors President Sindy Ready says business is not at a standstill.
“We are working with our buyers and sellers to keep them up to date on the market,” she said. “For clients who are currently under contract, we make sure the process is moving along towards closing. We are still listing and selling homes while maintaining social distancing with the use of virtual tours and all the other technology that real estate employs.”
Ms. Grossman echoes a similar sentiment of moving forward in uncertain times.
“Life goes on, even in these trying times,” she said. “People who lose their jobs and need to downsize will likely stay in the market. Our members will do whatever possible to help them. We’re fortunate that real estate is a business that has embraced technology -- almost everything from offer-to-closing can be done electronically.”
For Paradise Valley Realtor Chris Karas, the No. 1 initial impact of COVID-19 on the real estate business is handling the fear of the unknown.
"We have buyers and sellers who need to move and we make it happen. In times like this, communication with experienced real estate agents is key. I ensure that all of my advice is substantiated with facts, not fear,” he said. “We are still open for business and still selling homes.”
--- Chris Karas
Mr. Karas is co-founder of Launch Real Estate and president of The Karas Group, a leading broker of luxury real estate throughout the Phoenix metropolitan area.
On a national level, Lawrence Yun, National Association of Realtors chief economist, reports the housing market at the time of COVID-19 was on steady ground.
“Numbers in the coming weeks will show just how hard the housing market was hit, but I am optimistic that the upcoming stimulus package will lessen the economic damage and we may get a V-shaped robust recovery later in the year,” he said.
“Unlike 2008, there is no subprime lending and overproduction by home builders. Sales will tumble for a few months but prices will hold on. With the stimulus package, any lost sales are likely to show up as a delayed transaction in the second half of the year.”
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