These cities buck the coronavirus real estate slump

These cities buck the coronavirus real estate slump

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Coronavirus has run roughshod over most of the nation’s big-city real estate markets for more than six weeks now, paralyzing agents, halting showings and causing double-digit drops in listings and new inventory as frightened sellers withdraw their properties from consideration.

But in a precious few metro areas, something different is happening.

In Atlanta and Raleigh-Durham, North Carolina, in Austin, Texas, among others, real estate agents are fighting back against the pandemic.

They’re making sure that state and local governments acknowledge that their profession is essential so they can keep working. They’re figuring out how to make clients feel comfortable about interactions at a time of masks and gloves and disinfectants, and they’re finding ways to complete just about every stage of the real estate transaction in the virtual world.

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“You have to give a huge amount of kudos to the real estate community,” said Jeremy Crawford, who runs Atlanta’s Multiple Listing Service. “They learned how to show homes and sell homes and still practice social distancing.”

As a result, this rare cluster of cities saw real estate listings or new inventory grow in the first week of April compared with the same period a year earlier, according to data provided by Zillow.com – a remarkable achievement considering that almost every major metropolitan area in the country saw a sharp drop in those categories over the same period.

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Consider Los Angeles, which saw its total listings plunge 30% to around 12,800 as of April 5; or Phoenix, where listings were down 27% to just under 15,000; or Philadelphia, where listings dove 26% to 14,000.

Or ponder new inventory in Detroit, where only 113 new homes came on the market as of April 5 – 65% fewer than last year; or New York, where 532 new homes emerged – a 57% drop.

These were massive declines, but not uncommon during COVID-19.

The pattern: Cities that suffered the greatest declines in real estate activity were usually in regions where coronavirus landed first – the West Coast – or where the disease hit hardest and governments went into lockdown – the Northeast and upper Midwest.

“Pennsylvania and Michigan were two states that were very strict about lockdowns,” said Lawrence Yun, chief economist at the National Association of Realtors. “Visiting a home was a violation there. As a result, Michigan and Pennsylvania real estate activity went down much more than say Virginia or Georgia.”

Jennifer Pino, the president of Atlanta Realtors Association, acknowledges that the continued strength of her city’s real estate market is because the outbreak in Georgia came later and was not nearly as severe as in California or New York.

Atlanta’s real estate market was also in hyperdrive prior to COVID-19, Pino said. Inventory was extremely tight – at around the two-month supply level – well below the six-month dividing line that separates a buyer’s market from a seller’s market.

But once the pandemic hit, Pino said Realtors in Atlanta petitioned Georgia’s governor and the mayor of Atlanta to make sure everyone from agents to appraisers would be able to keep their doors open.

‘We don’t want people in our homes’

Jo Gipson, an assistant broker with Compass Real Estate in Atlanta, said one of the biggest hurdles has been making sure buyers and sellers feel safe.

“In March there was a pause in the market,” she said. “A bunch of sellers said: ‘We don’t want to have people in our homes.’ Everything got put on hold or withdrawn. But that only lasted a couple of weeks until we were able to figure out what was safe.”

Armed with gloves and masks and Purell, agents began to venture out again. They learned to go to homes ahead of time and turn on all the lights and open all the doors so buyers and their agents wouldn’t have to touch anything. They learned not to ride around with clients in their cars. They relied more on virtual tours, walking through homes using FaceTime to show clients every nook and cranny.

“We took it really seriously,” Gipson said. “We knew people needed to feel comfortable.”

Then came the innovation, according to Tanya Oursler, and agent with Realty Associates of Atlanta.

Realtors, mortgage brokers and bankers, title agents and attorneys figured out how to conduct practically every stage of the real estate transaction from showings to closings in the virtual world – the one exception being appraisals.

The most difficult piece, Oursler said, was the closing. But Georgia ended up allowing virtual notaries to oversee buyers, sellers and their attorneys remotely. The different parties would all appear on Zoom and go through the paperwork. Then the documents would be sent back to the attorney’s office for their official stamps.

“Whether some or all of this will continue after this, I don’t know,” Oursler said. “But the crisis caused everyone to become more creative.”

Following the rules

For Jason Lee and his wife, Katie, who were about to have their second child, it was the closing of their four-bedroom house that coincided with the outbreak of COVID-19.

With help from Gipson, they found their new home in February in Decatur, a city in northeastern Atlanta. They made an offer in mid-March.

By the time of the closing, the pandemic was in full swing. Jason Lee, who owns a company that builds and installs pipes and sewage systems, said there was nothing revolutionary about signing in all the right places.

“We just followed the rules,” Lee said. “We went to the closing in the attorney’s office. Everyone sat in the conference room – eight feet apart. We all wore gloves and masks. We passed around the documents, and everyone used their own pens.”

He added that the room was sanitized prior to their arrival and again after they left.

As a result of these precautions and innovations, Oursler said Atlanta will not see much of a downturn when the April numbers come out.

“While there have been some people who stepped out of the market for a moment, there were lots who stayed in,” Oursler said. “For them, it may have been good timing. With fewer buyers, it might have been easier for them to find what they wanted.”

According to Crawford, the chief executive of First Multiple Listing Service in Atlanta, listings in his city have dropped 15% since the beginning of April. So home selection has dwindled.

But Crawford said there’s still plenty of data confirming the strength of Altanta’s market in comparison to other cities across the country.

CoreLogic data, for example, shows that Atlanta was second in the country in terms of the decline in mortgage applications behind only Dallas. That means more buyers are moving ahead with purchases than practically anywhere else. And while the total number of showings dropped during the pandemic, they’ve staged an impressive comeback.

As of April 6, showings of homes in Atlanta bottomed out at 48% below the first week in January, Crawford said. Since then, they’ve increased every single day and are now just 7% below the first week in January.

“That is a substantial change,” Crawford said. “The Atlanta market is not only doing well compared to other regions of the country, it’s doing a pretty darn good job compared to last year.”

The same can be said of Raleigh-Durham, 400 miles to the north.

Freeze frame, then a thaw

The real estate market there was also red hot before COVID-19 and inventory was exceptionally tight.

“We had two months of inventory or less,” said Van Fletcher, a broker/Realtor with Allen Tate Realtors in Raleigh. “Properties were moving at every price point from starter homes to luxury.”

The local economy with its universities and hospitals and concentration of high tech companies was booming.

“When the initial shock of COVID-19 came, we hit a freeze frame on activity,” Fletcher said. “Showings dropped off. New listings dropped off, and that lasted most of March. That’s when we saw the greatest fear. But things started to thaw a little in April.”

Since then, the market has been relatively strong, especially at the low end.

“Under $300,000, we’re receiving multiple offers,” said Otto Cedeno, the owner of Movil Realty, a Durham real estate firm. “People are buying properties without seeing them and closing on virtual tours.”

Cedeno said his company was selling 130 to 140 homes in February and March, but he’s going to pass 160 in April, and that’s at the height of the pandemic.

“A lot of people are still moving to this area,” Cedeno said. “I don’t think we’re going to suffer anything.”

‘Please be safe’

But Realtors in the Raleigh-Durham market did not come together as they did in Atlanta. That’s reflected by the fact that their five-county metropolis is riddled with different rules governing what agents can and cannot do during the pandemic.

“Durham stopped all showings,” said Tricia Manneh, an agent with Choice Residential Real Estate in Raleigh. “You could only show homes that were vacant and you couldn’t go at the same time as the buyer.”

Other counties – Wake, which is home to Raleigh, and Chatham – have no restrictions whatsoever.

Realtors say they’ve been able to keep serving customers by doing virtual tours and video walk-throughs.

That’s how Fletcher has been able to keep showing houses to Liz Stokley and Ryan Stephens, a married couple who are planning to move to Raleigh from Baltimore in June.

Stephens is a radiologist who will be joining a physician’s practice. Stokley is a marketer for Boston Scientific who sells next-generation medical devices to hospitals around the country.

The pair of millennials met with Fletcher and visited five or six houses on a trip to Raleigh in January and they had planned to return in March, but the pandemic made them feel squeamish about airplanes.

“So we started doing video tours with Van,” Stokley said. “We felt very lucky that he was willing to go into these houses.”

So far, Stokley and her husband have looked at about eight houses in the $600,000 range and have made an offer on one of them. But they got beat out by a buyer who was able to close at an earlier date. So the search continues.

Statistics show that the Raleigh-Durham market has its weaknesses.

Stacey Anfindsen, a residential market analyst who runs the Triangle Area Residential Report, pointed out that showings were down by more than 20% in March in every county except Johnston County compared with last year.

“With showings down, pending sales should be down,” Anfindsen said. “But there’s one caveat: virtual showings. I don’t have a way to quantify them.”

Meanwhile, other numbers provided by Anfindsen still look positive. Sales for the first quarter in Raleigh-Durham were up 12%. The average resale price was up 6%.

Cocky drunk confidence

Texas cities also have shown considerable strength during the pandemic, and none more so than Austin. 

Though total listings were down nearly 6% to just over 5,100 homes as of April 5, new inventory was up 13.5% – more than any other major metro area in the country.

Mark Sprague, a housing market expert with Independence Title in Austin said there were very few homes for resale before the pandemic hit – less than a two month supply. The only thing that was keeping prices from shooting up too rapidly was a healthy supply of new homes. But while construction has continued through March and April, Sprague said there has not been enough building to cause total listings to rise.

“We did not have inventory going into the crisis and will not have inventory coming out,” Sprague said.

He added that he usually looks at two indicators when considering the strength of a real estate market – the ability of the local economy to add at least 22,000 jobs a year and consumer confidence. Both are still looking good in Austin.

With respect to consumer confidence, as long as it’s between 90 and 110, consumers will still buy houses, Sprague said. If it’s above 110, sellers will receive multiple offers.

“Before the crisis, consumer confidence was up at 154 in Austin, which is what I would call cocky drunk,” Sprague said. “Since then, consumer confidence has dropped about 30 points.”

But that’s still above the all-important 110 demarcation line where multiple offers are prevalent.

“Across the board, my agents are busy,” said Mary Anne McMahon, owner of Re/Max Posh Properties in Austin. “Lower-end properties — $350,000 through $600,000 – are still receiving multiple offers.”

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