My 5 Cents Worth on This Extraordinary Market
A Lot of People are asking me nowadays where the market is heading. This is a very natural question during these extraordinary times. The shift from a very bubbly and active market with prices going up and aggressive buyer demand has been very sudden and unexpected. Friday, March 13/2020 will always be remembered in the Real Estate circles as the day everything went sideways.
Since that day we have seen both new potential sellers and buyers go on the sideline. The only remaining active clients were the ones who had deals in motion before March 13. Either sold their house and needed a new place to live or bought a new house and still needed to sell. No new and fresh people looking to make a move entered the market after this day. Even the investors started to cautiously calculate their moves. In an unchartered territory where the unknown is bigger than the known psychology plays a bigger role and the instincts to preserve and hold back are predominant.
As a result, the buying and selling market went into a sudden deep freeze. What is remaining, for now, is some pressure on the rental market. People that in the meantime do not like to commit to heavy real estate purchases prefer to rent until the storm is over. As a result of the heavy job losses, the anticipation of many is for real estate prices to correct themselves and to go down.
Last Week’s Numbers at a Glance
The true measure of what we face now will be determined by the length and severity of the economic shock. In a case where all these people that were laid off in March and April don’t go back to work soon enough, businesses don’t have the cash flow to sustain them and the government aid will run its course we will see substantial price reductions. We need to wait and see but for now, the probability of this happening is quite big.
This week marks the third week where we note the effects of the pandemic on our local real estate market. The number of transactions has been reduced to Only 57 and sold Price to Listed Price percentage has come down as well to 99% from 105% three weeks ago. Also, the number of new potential sellers/buyers has been reduced significantly and consequently market activity. As a comparison same week last year had 272 transactions. This is exactly an 80% reduction in the number of transactions. Usually, the beginning of the spring is where most of the activity is for the year.
Most of the activity has been around the more affordable properties under the 1 million mark. This is usually the starting point in a downturn. Activity still remains in the more affordable properties and we tend to see the more expensive properties start to drop down in prices as a result. This is definitely a trend to continue monitoring for the next several weeks.
In conclusion, the shift to a Buyer Market which is pronounced above the 1 million mark properties is happening as we speak. The severity of this change will be defined by how long the pandemic is here to stay and how many people will lose their jobs eventually. I predict that this trend will continue at least in the next several months.
Take care everyone and stay safe and healthy.
I will keep you informed…