Assessing the initial impact of COVID-19 on real estate
By Greg Hanner Sponsored by: Eastern Connecticut Association of REALTORS®
Soon after COVID-19 arrived, Connecticut and 40 other states announced statewide stay-at-home orders, applying social distancing measures and limiting movement to essential activities only. Most other remaining states had regionalized measures in place as well. The economy has reacted swiftly too, with most indicators pointing to a likely recession.
As open houses are being halted and virtual showings and open houses take their turn, or drastically reduced and set on an appointment-basis only, we will likely see the full impact on real estate in the next six months from sustained disruptions to new and existing supply and sales funnel, and further declines in affordability from job and income loss affecting consumers.
The following looks at the early readings of housing metrics and economic indicators surfacing post-COVID (these will continue to be updated on a weekly basis as the situation evolves):
Unfortunately, COVID-19 hit the market during peak home-shopping season in CT. Historically, demand for homes peaks and home sales accelerate particularly quickly at the end of March as the spring kicks into gear. Demand-wise, March and April have consistently ranked as the top two months for online search activity relative to inventory, making this time of the year the most competitive for housing as buyer interest peaks and sellers slowly follow suit. Under normal circumstances, home sales reach a peak at the start of the summer in late June or early July, with the second quarter of the calendar year typically representing 28 percent of all sales annually.
The spring market was off to a great start with the March median price up by 18 percent to $229,900 over the same period las year. The first quarter of 2020 showed a remarkable gain for condos, with a 20 percent increase in the number of units, a 54 percent increase in volume, and a 15 percent increase in median price over the same period last year. Despite March monthly figures, Connecticut has seen a 60 percent drop in new showings from mid-March to mid-April as well as a 40 percent drop in new listings. The full April sales figures are likely to capture bigger and more widespread declines since April sales would typically have gone under contract in March, post-COVID.
With banks' and mortgage servicers' rising concerns about finances, mortgage rates are expected to be more volatile across the country. Higher rates could impact buyers access into the housing market, particularly in the already high-priced, inventory tight areas.
According to a realtor.com national user panel survey from the end of March, 49 percent of buyers report feeling less optimistic about home buying as a result of COVID-19, 37 percent of buyers looking to buy in the next six months report having to postpone their purchase and 44 percent of sellers report looking to sell later as a result of COVID-19. The good news is, Connecticut has taken a cautious and thoughtful approach in navigating both the health and economic crisis, and Realtors are confident there will be a sooner rather than later.