COVID-19 Real Estate Update: The Market Continues to Shift
COVID-19 Real Estate Update:
The Market Continues to Shift
It’s been a busy few weeks in residential real estate. We, at Powers Realty, have been monitoring economic dynamics nationally, as well as locally, to anticipate changes in the local housing market. We’ve also been working with current and prospective clients to determine the best strategies and plans for selling their homes or buying new ones. And we’re getting used to new ways of doing business.
We are seeing big changes and I’m getting lots of questions which are probably on a lot of home owners’ minds.
What’s the biggest change you’ve seen in the last few weeks?
The biggest shift impacts the wealthiest borrowers in the country. The availability of jumbo mortgages plunged by 37% in March, more than double the drop in the overall home-loan market, according to the Mortgage Bankers Association. As of today, it’s getting increasingly difficult for borrowers, even the most reliable ones, to secure a loan for more than $510,000. This signifies a rapid change in the market in the last 60 days, and it is not expected to subside soon.
Are home sale prices holding steady?
Yes, local Milwaukee-area home sale prices are holding steady for now, however, I expect that to change when the “Stay at Home” order is lifted. Home owners who have lost their jobs may seek to sell their homes to get the equity from it very quickly. You will see a shift from low inventory to possibly high inventory and most certainly increases in short sales and foreclosures, as people who have lost their jobs cannot afford to pay their mortgage. Therefore, if you are planning or want to sell, now is the time before prices are forced lower due to increased housing inventory that is inevitable.
How difficult will it be to sell (or buy) my luxury home locally?
Luxury homes sales in the Milwaukee Metro Market are generally defined as house sales above $500,000. Showings in this market were down in March 72% versus February. The market shift is most dramatic here because of changes in lending. Borrowers’ loans that exceed the “conforming” loan limit (set by the Federal Housing Finance Agency) of a single-family home in Wisconsin (above $453,100) are seeing much tighter restrictions. Some of the larger banks, like Wells Fargo, are no longer offering jumbo loans (also known as jumbo mortgages) to anyone. Since a jumbo loan is very difficult to obtain today, if you are seeking to borrow beyond this point, you may have to shop around quite a bit. In the last 10 days we have seen the biggest changes in jumbo loans since 2013. Many banks have pulled back and will not offer portfolio lending either. And for any Sellers out there, you will need to scrutinize offers very carefully in this market and make sure your Buyers’ pre-approval and loan documents are current to ensure a successful closing.
What are showings like if I do list my home?
Showings have decreased significantly but are very high quality. Most Buyers who are viewing homes are not casually shopping - they need to buy a home. As a result, if you are the only one or one of a few homes in your price point in your community, you are still very likely to sell quickly and for a very good price today. Also, Buyers are spending more time studying homes online. Our site visitors are spending 20% more time viewing our property pages versus April 2019. They are studying homes by viewing the 3D Virtual Tours of our clients’ homes, photos, aerial tours and listing details before they decide to schedule a showing. We are conducting showings carefully, abiding by CDC guidelines, wearing masks, gloves, and wiping down surfaces with a disinfectant. Even amid COVID-19, this might be one of the best times in the last 10 years to put your home on the market because as the market shifts these prices will not last long. If you’re curious about your home’s valuation, call me (414-870-7175), and I’d be happy to provide one for you.
Are homes still getting accepted offers?
Absolutely. Homes are still selling at a very fast clip for all homes $500,000 and below, as inventory is still very limited. The homes on the market today are selling for nearly full price even if they have been on the market for a while because the consumer has very few choices. If you are considering putting your home on the market, don’t wait. It may seem contrary to what you may think considering what is going on today, however, it is critical to move now if you need to move.
What does the future look like?
Based purely on economics, there is and will continue to be a market shift. Once the “Stay at Home” order is lifted and some workers do not see their jobs returning or recovery is slow and more people get laid off, they will seek employment where they can find it and that often means relocating. It is also highly likely many people will have to sell their home to use the equity and that also means more housing inventory. With unemployment claims being the highest in recorded history, you should expect a big change in housing. Currently, there is a grace period for mortgage payment defaults and rental defaults. However, in the fall when the banks request full payment on mortgages, expect to see an increase in foreclosure and short sales. It is likely these will be higher-end defaults.
So overall, it is not great news, but anticipating what could come and preparing for it is very important to success. We know what is likely to occur in residential real estate in the Milwaukee area market which can help in making good financial decisions in regard to the sale of your home or buying a new one. Markets go up and markets go down. We have had a great 10 years in real estate. I am pretty bullish about the future even if we enter a bear market. It is how you navigate the market you are in that sets you apart. You may sell in a declining market but if you are also a buyer you are buying in a declining market. There is a silver lining to be found.
Powers Realty Group is a distinctive boutique real estate broker focused on the needs of customers delivering exceptional results. We are the trusted local experts. Call us today about buying or selling your home.Call Suzanne Powers