Greetings from our home headquarters!
Like you, we are all looking forward to the day when the term COVID is behind us as a memory and not a reality. As we observed last week in the State and Bay Area, we are still in the midst of understanding the pandemic and its effect on our lives personally and professionally. To that end we have been watching the real estate market evolve in its performance and practices as it responds to the burgeoning new normal that we see on the horizon.
What we are seeing in the first glimmers of data is that the real estate market continues to see activity. It may surprise some of you to know that in general, the market is still generating about 50% of the transaction volume that we were seeing at this time last year. This is preliminary data that is encouraging as it indicates that even through these past few dramatic weeks there is still a need for people to buy and sell homes in the city. The lower volume has served sellers to the extent that values have not fluctuated as much as the volume of sales and the speed at which homes are going under contract (changes in value are typically slower to adjust and with less overall volume, values are better insulated.) At the same time, we are seeing opportunities for buyers who are not being thrown into competitive multiple offer situations that we would have seen just a couple months ago. That new normal has meant that the buyers who are shopping are able to find homes with less competition. In this respect we can say that the market is currently feeling reasonably steady, but at a much slower pace and with less volatility in pricing that leads to overbidding.
The new normal has drastically changed the way in which properties are priced, marketed, and sold. ‘Transparent pricing’ has become a common term in the industry as a way to signal to buyers that the price asked will be accepted if a reasonable offer is presented. While transparent pricing has become common there are exceptions to the rule and even to this day we are seeing some homes priced low to get multiple offers.
Virtual tours have currently taken the place of open houses and up until last week, properties could only be shown if they were vacant. Now, even homes that are occupied may be shown but the owner must not be present, and all other protocols must be followed. Showings are not happening in any type of open house format and instead are done by appointment only and with many safety precautions. Among other requirements, buyers are being asked to sign a PEAD (Coronavirus Property Entry Advisory and Declaration) disclosure form prior to being given access to a property, and some listing agents are asking for proof of funds or a lender pre-approval letter prior to allowing buyers to enter.
These changes have been a major adjustment to the way we do business and we have been working hard to adjust and meet the challenge. While it is still too early to understand what long term trends will be, since open houses are currently on hold indefinitely, we must adjust our current expectations of how value is achieved. The past 9-10 years of our market has focused on low pricing, many open house visitors and multiple offers generated by numbers and demand. Although there are still active buyers, the numbers have diminished (at least for now). Our marketing strategy is currently focused on properly preparing a home for sale, pricing a property to support its value while also generating the most attention, creating compelling virtual marketing, and maximizing the showings and attention for the property.
What does the SIP extension through May mean to the market in terms of practice and performance?
This is an area of great speculation at this time for real estate practitioners in the city. While we are expecting pent up demand to occur in terms of buyers and listings, this is subject to speculation. There are many people, businesses, entities, sellers and buyers who have been waiting for this moment to ‘pass’ prior to making any moves. To that end the previous deadline of May 4th was something that many of us were watching to see how it would impact the volume of transactions and if there would be an opening of the ‘gates’. The extension of the SIP, (adjusted now to permit the showing of owner-occupied properties under certain circumstances), along with the governor’s proposal of a 4 stage opening indicates that the opening will be more gradual than what we may have expected. The anecdotal prediction is that many of the buyers and sellers who were holding off on making moves until the SIP is over are simply going to begin to proceed with listings and not wait. This means that we should see a steady increase in listings through May and into the summer, but perhaps not quite as much of a ‘bump’ as we were expecting just a few days ago. We also expect the possibility of the market continuing through summer in a way that is unusual for SF. Typically we see a large amount of activity in the spring with a sharp drop off June-August. With the Spring market mostly halted and with less San Franciscans fleeing the city, we very well might see homes continue to come on throughout the summer months.
There are still many looming questions for the economy as a whole that will have an impact on the market as well. On this front, we believe that the optimism observed in the stock market and the good news about a possible potential vaccine in the fall are all good news for the real estate market. When combined with low interest rates, we can see the possibility of a more stable market with less overall inventory, and values that will remain relatively stable for the next few months. We also hope that the relatively low loss of jobs in the Bay Area as opposed to elsewhere will keep our market stronger than most. Like everyone reading this, we hope that the good news increases as the next few weeks ensue and that all of us can return to a more normal routine of life with optimism and some light at the end of the tunnel.
The next phase of this new normal will be coming this summer as our city, state, and country begin to open up. This is a gradual process and one that we all hope will begin to bring the economy back online in a way that is safe for all of us. We are here to serve you whenever the need arises and will be here to provide updates from the field as we see new patterns emerging.
Stay safe and we are always available to answer any questions!