Shutdown slows Pittsburgh housing market
In normal times, the beginning of spring should have been the perfect time for Megan Ewing to put her four-bedroom Hampton home up for sale.
A late March listing made sense because she expects a family to buy the house, and most families try to move in the summer to avoid disrupting the school year. She is also getting married this summer. She and her two daughters will be moving in with her future husband and his two kids.
“We are “The Brady Bunch,” 2020 version,” said Ms. Ewing, 42, a human resources director.
One day after she put her colonial-style home on Lingay Drive on the market for $310,000, Gov. Tom Wolf announced a shutdown of all nonessential businesses and ordered all nonessential workers to stay home. She was shocked 12 people still showed up for the open house that weekend. She was pleasantly surprised the next day when one of the couples who had come through submitted a written offer.
Then the buyers got cold feet a few days later. They backed out of the deal when the COVID19 pandemic showed no signs of slowing.
“I’m disappointed for sure. But I understand,” she said. “The sad thing is, we are at a standstill now. There is really nothing that can be done.”
Life goes on, but the wheels that turn Pittsburgh’s real estate market are suddenly moving much more slowly in a world where so much business activity that supports the housing industry has come to a halt.
Real estate agents are not permitted to show homes to prospective buyers during the statewide shutdown for nonessential workers, and home inspectors cannot enter houses to do reports.
Banks and real estate closing
companies are allowed to keep doing business as long as they observe social distancing rules. But the homebuying process is hamstrung by the closure of government recording offices vital for doing title searches and filing deeds.
It’s an abrupt change for a Pittsburgh housing market that had been so robust that buyers were jockeying to outbid each other almost as soon as homes hit the market in neighborhoods with strong demand and low supply.
The number of homes listed for sale in the Pittsburgh region fell more than 10% between 2018 and 2019, according to a report by West Penn Multi-List in December 2019. The report also pointed out that this region had the fewest number of homes actively listed for sale in four years.
But the low inventory could be a saving grace: “If people lose jobs in large numbers, values could decline,” said Lawrence Yun, chief economist at the National Association of Realtors in Washington, D.C.
The Department of Labor reported Thursday that unemployment claims skyrocketed to 3.28 million new claims last week — well beyond the 1.5 million that analysts had expected. Pennsylvania claims hit 650,000 over the past two weeks. The grim unemployment news was muted a bit by a $2 trillion federal aid package expected to put cash in the hands of millions of Americans.
Mr. Yun said he feels good about real estate values holding steady through this crisis because, unlike the Great Recession a decade ago, the nation’s financial system is not saddled with subprime loans or overproduction by home builders.
“One positive characteristic for Pittsburgh is that it has a major housing shortage,” he said. “When there is a major housing shortage, prices don’t go down. Builders have not been building in relation to all the job creation in the past several years in the Pittsburgh region.
“Also, homes that come into the market are inspiring bidding wars for some homes, which also is a testament to Pittsburgh’s housing shortage.”
Bucking the trend?
John and Lubie Radziewicz recently took a home equity loan on the Lawrenceville home they have lived in for 31 years to buy a retirement home in Penn Hills. They want to be closer to their daughter, who lives there.
The refinance agreement requires them to sell the Sherrod Street house in Lawrenceville to repay the loan that they used to buy the house they purchased in Penn Hills.
Although Lawrenceville has been one of the hottest real estate markets in Pittsburgh over the past decade, they worry the home they bought for $38,000 in 1989 may fetch a lower price than it would have earlier this year due to the impact of COVID-19 on the economy.
“It may cause problems. We hope it doesn’t,” said Mrs. Radziewicz, 61. “We see other homes still selling.”
They plan to list their home in May, after they have relocated to their new three-bedroom ranch with a two-car garage on Crescent Drive and, hopefully, after the pandemic is under control.
“It’s a really scary decision, but we have to sell. It’s time to go,” Mrs. Radziewicz said. “If you wait too much longer, we won’t want to do it. I don’t want to be 90 and moving.”
The housing market nationwide is showing signs of slowing down despite super-low mortgage rates.
“It’s become clear that the broader economic slowdown is having a greater effect on housing, at least for now,” said a report released this week by Seattle-based Zillow. “Real estate showings have dropped sharply, weekly jobless claims [have] surged and analysts have downgraded ratings for some of the nation’s largest home builders.
“The big question at the moment is to what degree measures being taken by local, state and national legislators will help limit the number of foreclosures in the months ahead.”
Pittsburghers, in general, may be less vulnerable to possible price declines because they have a tendency to stay in their homes for decades.
They also typically have a significant portion of their net worth — more so than stocks — tied up in their homes, which is partly why a study by Zillow found almost 40% of all homeowners in the Pittsburgh region are free and clear of mortgage debt. It was the highest percentage of outright ownership the company found in any of the 30 largest metropolitan areas that it tracks.
John Petrack, executive director of the Realtors Association of Metropolitan Pittsburgh, said the region’s housing market has a reputation for bucking the national trend.
“Pittsburgh is a strange housing economy,” Mr. Petrack said. “During the financial crisis of 2008, housing sales slowed down, but values continued to creep up modestly at about 1% to 1.5% appreciation across the region,” he said.
Virtual closing
Real estate agents and lenders are pushing to keep home sales moving, but the way settlement companies are closing deals has changed dramatically over the last two weeks, said Rich Milesky, president of Penn Suburban Abstract in Hampton.
“We’ve had people who wanted to stay in their cars at the closing,” he said.
“They meet us in the parking lot outside the office building, and we hand them the closing documents through a cracked window. We watch them sign through the windows, and they slide the papers back through the crack when they are done.”
The days of the traditional closing where everyone — buyers, sellers, agents and the closer — sit around a table has become outdated in the age of social isolation.
Even people who come inside the building to sign documents are frequently requesting to sign at a distance, in separate rooms, Mr. Milesky said.
“What we do now almost exclusively is we are explaining the documents via FaceTime prior to meeting the parties so that when we meet, it’s just signing,” he said. “We email all the documents to them and let them print them out so they know they are not contaminated. They bring the documents to the closing, sign them and hand them to us.
“One way or another, this is fast becoming normal.”
Even before COVID-19 came onto the scene, closings took weeks to process. At this point, transactions are still being done, but it is often a logistical nightmare. Many of the deals Mr. Milesky is closing now were already in the pipeline before the shutdown, although he said some agents are still getting new deals.
The new market for real estate likely will be online, said Howard “Hoddy” Hanna III, chairman of Howard Hanna Real Estate Services, Pittsburgh’s largest residential real estate company.
He said his company hosted 300 virtual open houses last Sunday, which resulted in several written offers to buy.
“That doesn’t mean they will buy a house without seeing it and having it inspected,” Mr. Hanna said. “They have 21 days to do that.”
The company began investing five years ago to build the technology to show houses virtually, take a mortgage application online, make offers online and sign all documents, including closing documents online.
He may not have anticipated the COVID-19 pandemic, but his company is ready for the digital era of real estate.
“We did some things early on to get ready,” Mr. Hanna said. “What’s happening now is forcing our people to learn to use the technology we have to work in a virtual reality world.”