Post Covid Landscape
The curve is flattening but it hasn’t reached its inflection point yet. The initial adrenalin rush of COVID has morphed into a tortuous marathon of stir-craziness and nagging anxiety. While counting down the unknown number of days until the end of the lockdown, it’s hard to resist the urge to get out there and do something. Or look for ways to bend the rules and jumpstart the economy (one’s own and everybody else’s). Hopefully most people will resist the urge and keep erring on the side of caution.
I’m using the extra time to imagine what real estate might look like after the unimaginable hardstop of the economy unfolds into a rolling restart of the economy. And how the process of selling real estate will change while everyone struggles to adapt to new rules, even while the threat of the virus remains.
There’s an alphabet soup of recovery scenarios getting tossed around and you can take your pick between the U, V, W or L shaped models. But let’s face it, no one really knows how fast things will recover. Here’s what my own stir-crazy real estate of mind is telling me:
Neither the worst case or best case scenario is going to happen. There won’t be a market crash and as much as we’d love it to be so, the market won’t just return to normal, right where it left off.
There’ll be a sharp, short term surge of activity as soon as the SiP is lifted, fueled by pent-up demand in search of inventory that needs to sell.
The Bay Area/Silicon Valley market will recover faster than the rest of the country – due to the relatively unscathed status of the tech industry and the unusual concentration of wealth.
Properties priced below the median (~ $900,000) will experience stronger sales as buyers stretch for entry level homes to take advantage of low interest rates and softer prices.
Mortgage issues affecting the availability of jumbo (above $765,000) and non-QM loans will slow home sales in the higher price ranges and make transactions more difficult.
Appraisers will struggle to find comps and begin to hedge their appraisal values in a downward direction – adding a degree of difficulty to standard transactions.
High end zip codes won’t experience price declines, while less desirable areas will see short term drops between 10 – 15%. Overall, the market will be more selective and less competitive in non-premium locations.
More people will reevaluate their lives and their choice of homes. New housing patterns will emerge related to considerations like: being closer to family, downsizing to less expensive areas, increased telecommuting, the need for better home-work environments, multi-generational living options and neighborhoods with less density.