Housing in Chico remains an ‘essential’ service in high demand
CHICO » Despite projected global economic losses due to the coronavirus pandemic, real estate in Chico is still in high demand.
Chico is still classified as a “hot” market on Zillow due to this demand, despite a drop in median home values of nearly 5% since November. Through 2019, home values increased 6.3% and the average rental in Chico is about $1,835.
Local realtors say despite the early stages of a drop in the economy, projections still show an expected rise in property value this year. So how can Chico’s realtors safely address this need in a pandemic?
Steve Depa of Sierra North Valley Realtors said “With the governor’s stay at home order, we were up until Sunday night considered non- essential.”
“We were as a group happy to see the compliance our industry took by backing away from current business,” Depa said.
Before Sunday, managing current and pending transactions was still allowed, just not new ones.
“As of Sunday night, we’ve been reconfirmed as essential and housing is definitely one of the essential needs that we all have,” Depa said.
Chico’s high demand and hot housing market has been known for years, particularly after the Camp Fire, he added.
“We were probably one of the most, in recent times, fast moving housing markets, partially because of lack of inventory,” Depa said. “The virus … is somewhat evaporating that process.”
There are still some people needing to purchase homes or who need to move forward with a transaction,” he added. “We haven’t yet seen an effect on prices because people still need houses.”
Selling those houses has just become a more virtually-oriented process.
“My colleagues are counseling people in terms of, if you don’t have a housing need right now its best to wait and not put more people at risk,” Depa said. “I certainly don’t believe there’s anybody showing people houses because they have nothing to do.”
Depa said based on the research he’s done and from current economic assessments, the coronavirus pandemic is similar to “an event like 9/ 11, in that for a period of time it changed people’s perceptions.”
Such an event can temporarily halt buyers from making decisions, but it will not necessarily affect the long term high demand present in Chico and Butte County as a whole, he said.
That being said, April, May and June “are almost written off by most business analysts,” he said.
“When the market turns around, the second quarter will drop off with some reduction but with pent up demand after, it probably will exceed where we were going into in March.”
Even if that quarter does turn around, it could take “30 to 60 days after that, to get them back in full production,” he said, but there are high hopes for the federal stimulus bill to “help get businesses through this crunch time that is pretty devastating to shut doors without opportunity.”
As the April-June period is typically a high point for year leases and renewal of lease agreements being signed in Chico’s college town, “It does affect re-leasing, it certainly will affect the rental market, Depa said. However, “it’s yet to be seen how the colleges will adapt from an online learning environment and their return in August. We were seeing strong re-leasing in student market ( before March).”
“We’re looking at it day by day, week by week — the information is changing so rapidly.”
Caution in turbulent times
Chico’s Coldwell Banker DuFour Realty’s Office Manager Carl Henker said “There are a lot of people are trying to compare this to the 2008 recession, but it’s a different animal this time.”
“A big part of the recession was we had an oversupply of the housing and people were trying to get rid of them. Now we have had a limited supply of housing so as we’re able to come out of this, I think there’s going to be a lot of pent up demand that we already had, however long it takes.”
That demand can be addressed safely with tools like online “pre-tours” so prospective buyers can view a house online before visiting, rather than traditional open house events, as well new forms that have advisories for the seller “about if they really are comfortable with people coming into their house,” Henker said.
“We’re being real cautious about showing occupied properties and not touching surfaces when they’re in the property, including lock boxes,” he added.
Other caution applies to what lending programs are offered to which buyers.
“The lending community is really looking into the high risk mortgages that they were doing and cutting back on whether they want to do them or not,” he said. Some lenders are even stopping such high risk programs like those with low down payments “to see what happens to the market.”
Impacts on business realty
Realtors handling the residential and commercial side anticipate different effects to both sides, Henker said.
“Chico’s market is so dependent on small businesses and we don’t have a large manufacturing plant or big employers that are driving our economy,” he said. “There’s only going to be a certain amount who can sell, (and) a difference in the market between the entry level homes often bought by small business employees, versus the higher end homes, where the buyers of those homes may not be as affected by it.
Parts of the economy will recover quicker than others. It will depend on where the buyers are when we start to come out of this.”
Commercial impacts will also partly be based on what happens to spaces rented by larger companies and whether small “mom and pop tenants” will still be able to pay rent “versus the larger tenants, who can probably pay rent through this timeline.”
It also brings up the question about how office space could be used in the future.
“How many are going to decide, hey I don’t need 4,000 square feet to operate if my people are doing pretty well working form home?” Henker said.
“It’s not going to start to turn until the stay at home order’s been removed,” he said. “A big part of our recovery is going to be based on all the small business that have had to close their doors and how long it will take to reopen. People’s habits are going to be changed by this. A lot of small businesses are going to have to reopen like they’re a brand new business.
“It’s going to be hard to figure out which segment of the commercial is going to recover the fastest.”
Both realtors said it is early to know for sure what will happen to the Chico housing market at this point.
“We’re pretty resilient people in Butte County,” Depa said. “I’m hoping it’s something that at the end of the day makes us a stronger, better community.”