WOLLASTON WEDNESDAY #43: How is Coronavirus Affecting Real Estate Around Boston
As we put the first full week of May under our belt, a lot is left uncertain across most industries while trying to manage COVID-19. Today, I will share with you how we feel the real estate market is doing around Greater Boston. And beyond that, I’ve referred to some boots on the ground so we can hear how they are doing.
We’ve seen the coronavirus hurt companies heavily involved in retail, travel, food & bev, and hospitality. Here is what I like about Boston, we are heavily tech and healthcare related. Many of the industries that make up our workforce are still in operation. While the streets are empty, most of us are alive, doing well and working remotely. Because Boston is on the leading edge of technology that is disrupting industries, I feel we’re going to be sheltered compared to many other cities in America from a buying perspective. This recession or economic correction is also not housing related. In areas of the country, housing prices have actually increased because their is now less inventory. Homeowners haven’t been selling because they are scared and that is shrinking the inventory. Compared to other cities, Boston was sheltered more so even during the mortgage meltdown. Now... meet these rockstar real estate professionals working amid COVID.
Mark Savage - Coldwell Banker
Mark is a Savage and has been an agent for three years. Last year, he worked in over 20+ communities within an hour of Boston. He and his partner Drew Boujoulian specialize in first time home buyers and homeowners who are looking to downsize.
Patrick Wheeler - Northeast Private Client Group
Patrick is great friend and fellow commercial real estate agent and investor. He specializes in multi family commerical properties. Their company seems to still be closing a deal a week! I get all of their email notifications.
Jose G Maldonado - Vicente Realty
Jose has been a personal friend for the last two years or so. He is a Brockton native working within the Brockton community in the multi family space.
How has coronavirus affected your real estate business?
Mark - We’re doing 8-10% more business at this point in the year compared to last year. A lot of our sellers initially withdrew their plans to list their homes so we focused a lot of our energy in lower price point transactions with first time home buyers. Rates are also incredibly low for mortgages and we’re taking advantage of that. However now that we’re a couple months into COVID, sellers have noticed deals are still happening and they’ve slowly started to list their homes again. Another reason we pivoted to a lower price point is because a typical transaction with a client who is downsizing may include a home sale contingency; those deals have been harder to push through because sellers have concerns whether the prospective buyer will keep their job.
Jose - Coronavirus has definitely slowed down my business. I’ve been fortunate to close two deals since this lockdown started. I am still doing showings however gaining entry into multi family properties has been tough. Tenants are understandably nervous but this delays buyers from making moves to close deals. I work with a lot of first time home buyers and some new lending adjustments has made it difficult to get them underwritten.
Patrick - The lending environment has slowed down the market. Lenders are looking to decrease leverage with the buyers by increasing down payments. As a purchaser, that can throw off a cash on cash return on investment and potentially kill a deal. Connecticut has oddly stayed really strong though.
What changes in your business have you made operationally?
Mark - The workload has increased by 200-300%. Every showing now has to be accompanied by myself or Drew opposed to having buyers scope out open houses on their own. Whether we are working with a buyer or seller, we treat each showing the same way now. We always wear gloves and a face mask whenever we go out. Drew and I budget 30 minute blocks for each property viewing. The client gets 15 minutes to check out the property and then we spend another 15 minutes disinfecting surfaces, doorknobs ect to prepare for the next showing. A lot of our showings have been done virtually now. We are able to leverage Skype and Zoom video calls when looking at property on behalf of our clients. We tend to share pre-recorded walkthroughs with prospective buyers before they schedule in person walkthroughs.
Jose - I’ve done accompanied showings with my clients. However we always wear gloves, masks and we take off our shoes before we enter any home.
Patrick - our company as a whole has pivoted from more a cut and dry transactional approach to a more human approach of information sharing. These are uncertain times so we’re trying to create as much value as we can with our clients.
Has it been harder or easier to convert buyer and seller leads?
Mark - We’re working with more buyers right now who are ready to buy. We offer a consultative approach to our clients to truly put their needs first so attracting clients has remained steady for us.
Jose - Some lending adjustments have made it difficult to approve buyers. I’m happy that most of my business is referral based and I’m still getting referrals, but deals are closing slower .
Patrick - It has been harder. More investors are waiting for things to settle down before they get back into the swing of things. There is uncertainty in the market. We’ve seen how Section 8 properties can really put the investors in the best position possible.
A friend of Wollaston REI, Sam Reifman-Packett of Compass wrote a great blog earlier this week. I wanted to share part of it with you.
He also sold our HGTV featured home at 22 Leverett St, in Brookline MA. Check that property out here.
IS THIS 2008/2009 AGAIN?
Many Bostonians who owned property during The Great Recession are nervous that we’re about to relive that housing market crash. And while there are economic similarities between now and then, a housing market crash is not one of them. So how is today different from 2008? For starters, The Great Recession was an economic crash that was triggered by a housing market crash, not a housing market crash caused by a global crisis. The other reason is simple: supply & demand.
These two graphs show the Greater Boston housing market (Boston, Brookline, Cambridge, and Somerville) in April 2008, 2009, and 2020. The number of active listings by the end of April 2008 was nearly 4 times the amount today, and the end of April 2009 had roughly 3.5 times the amount today. When you compare that to the number of sales closed for that same time frame, April '08 had a backlog of 7.5 months of inventory, April '09 had a backlog of 8.5 months of inventory and this April only has a backlog of 2.5 months of inventory (meaning, if after today there were no more new properties added to the market, going off of the current sell rate, we would be clean out of inventory in 2.5 months).
On top of that, homes for sale in April 2008 were closing at an average of 93% of their original asking price, which dropped down to 92% of the original asking price the following April. Today? On average, homes are closing at 100% of their original asking price!
SO WHAT DOES IT MEAN?
To summarize, the one thing that's going to protect our housing market from a crash is inventory. We started 2020 with a housing shortage, and as a result of COVID-19, we have an even higher housing shortage. While it doesn't make it easy to find the perfect home, it does assure us that Boston’s housing market is holding strong. It’s possible we’ll see fluctuations in days on market, as well as small dips in some neighborhoods or price points, but overall the data we have currently shows the Boston market will weather this storm, and changes are only temporary. We'll be sure to update you all in a month to give you the second part of this story. In the meantime, if you have any questions about a specific market, don't hesitate to reach out!
Sam, Mark, Catherine and Lauren