As the global pandemic touches every aspect of life, people have been asked—or, in some cases, ordered—to shelter in place. But for some, either through necessity or desire, now is the time to house hunt.
Homebuyers right now are entering a very different market than in the past. The number of active listings in the Bay Area tanked from roughly 1,000 at the start of March down to 550 three weeks later. The number of listings pulled off the market increased more than tenfold in a single week between March 9 and March 16.
“Since the shelter in place was first initiated a couple weeks ago, the market nearly overnight shifted to a buyer’s market,” Justin Fichelson, a San Francisco-based Realtor tells Curbed SF. “Sellers by and large have had to decide to either remove their listing from the market or to adjust their price expectations.”
This isn’t to say people have stopped buying.
Some people, like Ambika Castle, a front-end engineer at Vox Media, were in the process of closing on a home when the shelter-in-place order happened. “We lucked out a bit, I think, so my circumstance may not be totally normal in that we started the day before shelter-in-place took effect,” she says.
Then there are the unusual buyers with money to spare who can still buy a home the way normal people order a Nintendo Switch Lite from Amazon. Take, for example, this Emeryville loft that sold to a cash buyer only one day after appearing on Curbed SF.
To help you navigate these unprecedented changes, we asked a handful of real estate experts in the Bay Area to weigh in on what you need to know about buying a home during the novel coronavirus.
Are prices coming down?
Every so slightly, yes. The most important thing that’s happening in the real estate market right now is that everything is frozen: Transaction volumes have slowed to a near standstill. With few being people able to move right now, we could see a slight dip in prices.
“In the transactions that we have closed since the original shelter-in-place order (about ten in total), approximately a third of them were renegotiated in some form by up to a 5 percent discount,” Nina Hatvany, a Realtor with Compass, told Curbed SF. “Most of the deals that were not renegotiated were those under $2 million, and we had an offer come in on a listing of ours that was over asking (priced at under $2 million).”
Now that the shelter in place has been extended until May 3—and could possibly be extended again—the economy has moved into an official recession. This means that the most notable price cuts will happen with the priciest of properties.
“I believe we’ll see prices drop by as much as 10 percent, particularly at the level of homes priced at $4 million and up,” she says. “The under $2 million market should still remain strong as inventory is so low and demand is still high. I anticipate we’ll see some price drop at that level, but more like in the 5 percent range.”
But not everyone is convinced that a widespread price drop lies on the horizon.
“So far we are not seeing prices come down as we are on hold for showings right now,” says Tracy McLaughlin, a real estate agent based in Marin County. “I think that the biggest effect on pricing we will see right now will be mostly about sellers not overpricing their homes versus actually reducing prices right out of the gate once COVID-19 is behind us.”
Issi Romem, follow at UC Berkeley’s Terner Center for Housing Innovation, agrees, saying, “In the for-sale market, we are less likely to see any drop in prices in the short term.” He notes that in the long term, when the economy and the housing market thaw from the current coronavirus-imposed freeze, housing prices will depend on the state of the overall economy.
When do you think people will start listing their homes again?
Although sellers have pulled their homes from the multiple listing system (or, the MLS), properties can still be found off-market. Since the shelter-in-place order went into effect, Curbed SF has received at least two private listings per day from listing agents still eager to showcase their homes. Sellers have also looked to other tools that the public has come to embrace, going beyond Zillow and Redfin.
“Third-party websites are missing the full picture,” says Marco Carvajal, a San Francisco real estate agent. “The top agents are using private pre-market marketing databases, networking groups, and Zoom meetings with peers to discuss upcoming homes for sale.”
Within just a few weeks, he says, he’s reverted back to a relationship-driven business while pulling away from the 2010s marketing norms.
Can you buy a house if a city is under a shelter-in-place order?
While you cannot physically visit a property at the moment, you can still purchase a home. Many realtors offer photographic or video tours in lieu of an in-real-life tour. The California Association of Realtors (CAR) cites the real estate industry as an “essential business,” but opinions vary.
Until recently, some realtors have been able to show homes while keeping physical distance, usually with the aid of a key lockbox.
“Open houses are obviously not happening, but private showings often with lockboxes in place are,” says Fichelson. And Hatvany notes that two recent buyers “purchased having viewed the photos online, and then visiting the home using a lockbox.”
Because of all the financial uncertainty, are banks tightening up even more? Are banks closed or slower than before?
Many banks have closed their branches for the time being in order to prevent virus spread and to keep their employees healthy, and with that comes delays.
McLaughlin says, “I have seen a bit of a delay with a few lending institutions on time for closings, but others are tracking what they did for years proceeding this. Banks will likely tighten a bit but the well regarded institutions seem to be offering the same products they did two months ago.”
How has the appraisal and inspection process changed?
Shelter-in-place orders mean that most appraisers or inspectors are not visiting properties at the moment.
“A significant amount of appraisers have chosen not to work right now and the ones that have only want to go if a unit is vacant, staged, and/or accessible through a lockbox,” notes Fichelson.
Expect a much slower process if you’re seeking an appraisal or inspection.
Are closings being delayed or put on hold due to stay-at-home orders?
Unless you’re able to pay in all cash, you should anticipate delays in closing. Most banks and lending institutions are backed up right now due to everything from business loans (small and large) or an influx of owners who are refinancing to take advantage of exceptionally low rates. “This, in conjunction with it being difficult to get appraisals done on time, has caused closing delays,” says Fichelson.
Banks are also less willing to take risks on major loans or loans with riskier credit profiles. Hatvany adds, “I believe that we will see that trend continue and intensify as the economic downturn and market uncertainty continues. We haven’t seen any banks closed, but they are certainly working at a slower pace than before, with fewer staff on hand.”
Carvajal notes that closings are still happening with the help of electronic signature and mobile notaries. “We’ve seen a backlog of closings and at times 24-hour delays in a property being recorded, but the city of San Francisco has done a fantastic job making sure that buyers can buy and sellers can continue to sell.”