There is no topic more pressing on the world’s attention than the coronavirus. The safety for ourselves and our loved ones is the first and foremost concern and hopefully the infection and death rates begin to decline. Beyond the concern for safety, we have been busy with friends and clients who are worried about how this will affect the real-estate market. This is what we can share with all of you, but before that, if you are not familiar with the CDC guidelines, see www.cdc.gov/coronovirus.
The real-estate market has been impacted for certain. As of the middle of March, surveys from the National Association of Realtors report that homebuyers are 48 percent less interested in buying due to the virus. Most brokerages have stopped showings and no longer have open houses. Sellers too have pulled back. Many have taken homes off the market or have delayed putting their homes on the market. So, both supply and demand for homes has stalled. This will have a negative impact on first- and second-quarter sales reports, without a doubt.
Right now, commercial real estate is clearly taking a hit as the decline in retail will close businesses and start to drive up vacancy rates. Likewise, the global work-from-home policy will decrease demand for office space. Restaurants, movie theaters, bowling alleys, and casinos are all highly exposed and the longer this lasts the more those businesses will be forced to downsize or close, which devalues the real-estate assets that support them. This is the most present danger for homeowners as commercial and residential are inextricably connected. Without a businesses and jobs, people can’t buy homes.
The good news is that this crisis is much different than the 2008 market crash. Right now, inventory levels are at historic lows and last month the absorption rate for homes priced between $300,000 and $499,999 hit an all-time low of 1.13 months of inventory. Keep in mind that six months of inventory is considered a balanced market. So, an increase in residential inventory will not pose a threat to value in the short term and may fuel a buying frenzy as the fears of the virus begin to lift.
On Monday, March 23, Governor Michelle Lujan Grisham ordered all non-essential business to close and for New Mexicans to stay at home. The order classified many real-estate services as essential so brokers, inspectors, mortgage lenders, and title companies can still do their work. With electronic documents and signature capabilities, buyers and sellers can still execute transactions and enter escrow. Title companies with drive-through closing capabilities can close transactions without the need for everybody to gather in the closing room. Currently the county clerk is still recording deeds but if that changes, sellers and buyers can agree to an addendum that allows the transaction to close and for funds to disperse without recordation. So, businesses are adapting, and the wheels of industry are still turning.
Our own marketing efforts include using 3-D (Matterport) technology to show our homes instead of doing in-person showings. With an interactive 3-D rendering of a property, Google Earth, and other resources, buyers can become incredibly familiar with a property. While some buyers have purchased houses sight unseen, we are not suggesting that every buyer will do that. However, these tools help in the short term, and will aid buyers to include it or exclude it from the list of homes they will see when showings resume.
The real-estate market is on solid ground and this global quarantine is simply going to have to play itself out. We are fortunate to live in the wonderful community of Santa Fe and the quicker we can stop the virus, the quicker we can get back to doing all the things we like to do. Until then, take care of your friends and family and support your local businesses the best you can. And especially, take care of yourself.