Real estate agents who lived through the housing crisis of the Great Recession do not expect a repeat performance during the pandemic.
“We are the exact opposite,” said Thierry Roche, a real estate agent with Keller Williams Realty in McLean, Virginia, who also hosts a real estate radio show.
During the housing crisis, there was a glut of homes for sale as defaults mounted, which caused prices to plummet.
The average number of homes on the market between 2007 and 2010 was 4.4 million. The sale price of homes dropped 12.4% during the fourth quarter of 2008. Defaults accounted for 45% of those deals.
Now, the total number of homes for sale has dwindled from a year ago, and prices are rising. In March, there were 1.5 million homes for sale, a 10.2% drop from a year ago, according to the National Association of Realtors.
The median existing-home price for all housing types in March was $280,600, up 8% from a year ago, according to NAR. Home prices rose in every region of the United States last month.
“We have an inventory shortage, which drives prices higher, even amidst this pandemic,” Roche wrote in an email. “It is the exact opposite of the 2008 housing crisis.”
Ralph McLaughlin, chief economist and senior vice president of analytics at Haus, an organization that coinvests with buyers purchasing homes, also doesn’t see another crash along the horizon for the real estate market.
“We don’t expect it to be a catastrophic collapse that happened in 2008. Things look very different now,” he said.
The current market has a low inventory of homes for sale, and homeowners have a high amount of equity in the properties they own, meaning few are highly leveraged, according to McLaughlin.
“Back in 2007, 2008, it was exactly the opposite scenario,” he said. “Back in 2007 … leverage was high. There was an oversupply of homes at that point.”
While the real estate market is not expected to repeat the housing crisis from the Great Recession, McLaughlin does project a dip in activity nationally because of the coronavirus crisis. Single-family home sales and mortgage originations will likely take the brunt of the impact.
McLaughlin forecasts a drop in both supply and demand because of the coronavirus. These reductions “will lead to a reduction of home sales and purchase mortgage origination between about 38% and 45%, respectively,” according to his report.
“They’re going to drop but not fall to zero. People are still going to be buying homes,” he said.
McLaughlin projects that the housing market recovery is likely to take the form of a “flying W,” with an initial sharp drop this spring, a noticeable rebound in the summer, another dip in the fall, and finally, a stable road to recovery by spring 2021.
One thing helping home sales is the technological advancements that have occurred since the Great Recession, such as virtual tours, signing documents remotely, and online applications for home mortgages.
“I think technology is going to help the industry stay afloat,” McLaughlin said.
Steven Gottlieb, a real estate agent with Warburg Realty in New York City, a coronavirus hot spot, relies on technology to do his job.
“Get ready to be using a lot more technology than before — virtual showings, FaceTime calls, etc.,” he wrote in an email to the Washington Examiner. “Open houses are mostly over, and buyers need to be prepared to see properties via Facetime or video. … Many buildings are not allowing anyone from the outside to enter.”
Real estate broker Gill Chowdhury of Warburg Realty told the Washington Examiner that “today’s buying experience has gone completely virtual. It’s still possible to negotiate for, contract, and close on a property, but you’ll have to be comfortable with doing it without the in-person visits.”
The time it takes to sell a home has actually shortened since the coronavirus pandemic began. Properties averaged 29 days on the market in March, down from 36 days in February and down from 36 days in March 2019. Over 50% of homes sold in March were on the market for less than a month, according to the NAR.
One troubling sign, however, from the NAR March report is an increase in buyers who could not close on purchasing a home. Among contracts that were terminated, 22% were due to “buyer lost job.” In February, only 1% gave this reason for not closing on the sale of the home.
