Rich people will get a lot of the blame…..
“Wealth is the vector.” That’s what sociologist Tressie McMillan Cottom tweeted last week, in reference to the spread of COVID-19 across both the globe and the United States.
Wealth is not the cause of every concentrated outbreak dotting the United States. But it’s the common denominator of so much of its spread outside of major urban areas. It’s the reason why so many of the coronavirus hot spots in the Mountain West — Sun Valley, Idaho; Gunnison County, Colorado; Summit County, Utah; Gallatin County, Montana — overlap with winter playgrounds for the wealthy. The virus travels via people, and the people who travel the most, both domestically and internationally, are rich people.
A party in the tony bedroom community of Westport, Connecticut, all the way back on March 5, became what one epidemiologist referred to as a “super-spreading event,” with infected attendees dispersing throughout Connecticut and New England, and one party-goer falling ill on a plane ride back to South Africa. In Idaho’s Blaine County, home to Sun Valley, more than half of the residential properties are second homes or rental properties, and more than 30,000 people fly into the regional airport during ski season alone. As of March 31st, 187 people in the county of 22,000 have tested positive, including local emergency room physician Brent Russell. Two people have died. The town’s small hospital has two ICU beds and a single ventilator.
“People come here from all over the world,” Russell told the Idaho Statesman. “Especially this time of year. When I’m in the ER, I get people from New York, Washington D.C., San Francisco, Seattle. Every week there’s people from those places. Most likely someone from an urban area or multiple people from urban areas came here and they just set it off.”
All over the United States, people are fleeing urban areas with high infection rates for the perceived safety and natural beauty of rural areas. Some of them own second homes in those areas; others are paying upwards of $10,000 a month, depending on the area, for temporary housing. The common denominator among those populations is, again, wealth — either their own or their families’. They can flee the city because their jobs can be done remotely, or they don’t work at all. They either had a vacation house already, or they can afford to fork over what amounts to a second rent, or second mortgage.
Not everyone leaving a big city because of the pandemic is heading for a vacation home; many people with mobile jobs are relocating to stay with family in suburban and rural hometowns. And many of the rural places that will eventually be hardest hit by the coronavirus are not upscale ski and beach towns, but small and often poor communities that have no tourist economy — or any of the infrastructure that comes with it. The resort areas seeing an influx of potentially virus-carrying city dwellers now are a kind of canary in the coal mine: a preview of how desperately overwhelmed rural areas across the country will be by the coronavirus, whenever it arrives.
From the coast of Maine to the North Shore of Lake Superior, hundreds of thousands of people have either already arrived or are scrambling to find vacant rentals. Some are taking precautions when they leave their primary dwellings, fully isolating themselves for 14 days or more in their new, temporary towns, as the White House has recommended for anyone leaving New York City. But many, presumably, are not.
“The worst part is that these second-home owners are coming up and acting like isolation is a vacation,” said Jen, 39, who lives in the northwest Colorado Rockies.Link to Full Article
Buyers, sellers, and agents are closing out sales, but the total number of pendings (above) is plunging because new escrows are running about 50% of normal.
Last week we had 31 new pendings, and I thought we’d be lucky to have half that many this week. But we had the same 31 new pendings this week too, and now that realtors were declared essential workers, we can go back to work if we have serious clients to help.
Last week we had 59 new listings, and this week we had 63 when we should have been hitting 100 or more – so new listings are down about 40%.
Remember seeing the furniture in the garage at our new listing? It was from our stager, who has had 15 cancellations this month. The staging truck came straight from unloading a bigger house, and because their warehouse is so full, they had to leave the extra furniture there while she is scrambling to get additional storage space.
Sellers are as leery about the market as the buyers are, which could lead to the Big Stallout – though sales could be hampered by having to cope with our toilet-paper tragedy:
Listing agents hire Showingtime to schedule appointments for cooperating agents to show a house for sale.
As of yesterday, California showings were down 55% from the first week of the year, which doesn’t sound so bad for a state that is lockdown. But next week will probably be worse.
The California Association of Realtors, one of the most powerful lobbying groups in Sacramento, has petitioned the governor to change the status of realtors to be essential workers – with stipulations. We can’t apply for unemployment, so there has to be a way for us to keep working.
This looks like just another Friday’s worth of activity!
We have 29 new pendings since Monday, so we’ll be a bit short of the typical 40-60 this week.
The C.A.R. issued a directive today, and this should shut down regular operations:
Unless we get creative!
Happy Lockdown, with no end in sight!
California Gov. Gavin Newsom’s order marks the first statewide mandatory restrictions in the United States to help combat the outbreak. It went into effect at midnight Thursday, meaning Californians should not leave home except for essential things such as food, prescriptions, health care and commuting to jobs considered crucial.
The restrictions will remain in place until further notice and come a day after Newsom warned that more than half the state is projected to be infected by the virus in two months.
“This is a moment where we need some straight talk,” Newsom told reporters. “As individuals and as a community, we need to do more to meet this moment.”
The order will not be enforced by law enforcement, he added.
“I don’t believe the people of California need to be told through law enforcement that it’s appropriate just to home-isolate, protect themselves,” Newsom said. “We are confident that the people of the state of California will abide by it and do the right thing.”
What will it mean for our local real estate market?
Our title and escrow companies are functioning (which might be case-by-case), and the county recorder’s office is accepting documents. Those electronic filings are coming in handy now – remember our tour of the process at First American Title? Link to Youtube.
The banks are open, but that doesn’t mean that mortgage companies will be funding loans. But we should be able to close sales where the buyers are paying cash.
Sellers will be reluctant to agree to any discounts requested by buyers on deals already in escrow, so some of them will fall out. Few will close for prices that are way under market, and maybe none – sellers would rather wait and get more money later this year (which will be the common perception).
Let’s figure that most of the existing escrows will find a way to close, either now or later.
What about new deals?
Are sellers willing to price their homes so attractively that buyers will make deals based on video alone? How many listings will have a video presentation that makes buyers comfortable enough to make an offer that is close to list price? Not many.
Sales will slow to a trickle over the next month or two.
Then at some magical moment, the coronavirus threat will be declared over, and we’ll get back to it. Kayla was listening to the D-E broadcast yesterday, and Howard Lorber recalled the NYC market after 9/11. He said that Manhattan sales came to a standstill for the rest of the year, but in January 2002, their market took off like a rocket.
There will be a scramble by the pent-up buyers AND sellers who really wanted to make a deal earlier, and who will want an early piece of the action. The naysayers will somewhat-reluctantly fall in line, and we’ll be back in business.
Will sellers need to discount? Here’s a likely scenario:
Buyer: I want a discount.
Seller: No, the scare is over!
Buyer: But there are lower comps now.
Seller: The coronavirus caused those. The ‘rona is over!
Buyer: I’m only buying if you discount the price.
Seller: No problem, step aside while I wait to get my price.
Could we see a surge of inventory once the immediate threat slows? Will the scare cause more people to sell – especially the older homeowners? It’s doubtful – after sitting at home for 1-2 months straight, the older homeowners are going to give up and pack it in. To have to re-ignite the painful ideas of finding a suitable home and packing up all the stuff will be even more uncomfortable. If there is a surge of older Californians not surviving the virus, I guess you could make the case that a few more inherited properties will come to market. But probably not rushed – a flatter curve.
Could this turn out better than expected?
The politicians’ rush to overreact is understandable, and they want to be heroes in the end. The numbers in China are already subsiding – could we get lucky and our strong reactions combined with our suburban lifestyles end up minimizing the impact?
From today’s WaPo:
We also come into contact with fewer people when we commute. According to the 2017 American Community Survey, more than 80 percent of Americans either work from home or commute alone by car. In Beijing and X’ian, on the other hand, only 30 percent of commuters travel by car. Italians similarly use public transit much more frequently than do most Americans. A paper from the Brookings Institution says that the average resident of Milan, the epicenter of Italy’s coronavirus outbreak, takes 350 trips a year on public transit compared to 17 for the average resident of San Diego. It’s a lot easier to get sick from the sneezing person next to you on the bus than it is driving by yourself.
These data suggest why New York seems especially hard hit by the pandemic. New York is one of the most densely populated places anywhere, with nearly 28,000 people per square mile. (Even Wuhan, the Chinese city where the virus originated, has only about 3,200 people per square mile.) And most of those New Yorkers don’t drive to work; New York’s Metropolitan Transit Authority says that more than 80 percent of rush-hour commuters to the central business district in Manhattan take transit. With a few exceptions in Staten Island and the fringes of the outer boroughs, New Yorkers live, work, commute and shop in much closer proximity to other people than almost anywhere else in the United States. It’s no wonder the virus is spreading rapidly there and in the commuter suburbs.
For now, our lives will be suspended, and the real estate market will wait it out. If there are going to be any deals, they will be in the next 30 days – but don’t expect much. For sellers, it’s too easy to look ahead.
Kayla flew home from Manhattan this morning on Delta – there were only 20 people on the plane!
Her Douglas Elliman offices are closed through March 31st and probably longer. Hopefully she didn’t bring the bug back with her, but it’s better than her catching it there and having to cope with it alone.
She loves being in Manhattan, and plans to go back, of course.
But what will the market be like for newer agents everywhere?
The big, successful agents will use this off-time to prepare additional marketing materials, and be ready to go once the virus is done. We’ll have 1-3 months of pent-up supply and demand, so we’ll try to squeeze the whole 6-month selling season into 60 days. The crafty experienced agents will be glad to facilitate those sales, but there won’t be enough to go around for everyone.
I’m guessing that we will probably sell 20% to 30% fewer homes this year, and it could be less. The sales will drop off long before sellers think about dumping on price, and because the virus isn’t a permanent change in the marketplace, it will be too easy for sellers to wait it out instead. It will be tough on every agent who is on the edge.
Somebody said today that they expect to see big price declines and foreclosures in the next 2-3 months, but that’s not happening. The moratoriums are in place, and homeowners who can’t make payments will get as much time as they need. It’s more likely that we will experience the Big Stall-Out, with the market still airborne and just waiting for the engine to kick back on.
We’re doing fine here at headquarters – how about you?
We’ve primarily worked out of the house for the last 17 years, so we aren’t experiencing any disruption just because we’re stuck at home. We’re still having two listings being prepped for market, and haven’t had any escrows fall out yet. So far, so good.
Our boss suggested that we don’t do open houses for the foreseeable future, and to use gloves and sanitizer for individual showings. Tours via FaceTime or Skype are encouraged as well.
Here’s a snapshot of my hotsheet this morning – an equal compliment of new listings, price changes, solds, and new pendings (six each):
The volume will be light, but as long as we keep seeing new pendings, the market is working!
There isn’t a central website for viewing videos of local real estate for sale, so let’s do it here.
This home has been on the market for a while, but the price is now down to $9,395,000:
If you’re an agent who wants extra exposure for your listings, send me your videos of homes for sale!
Ben Faber, formerly of Redfin but now at Compass, has this home for sale in Berkeley:
This is a fantastic new home in Del Mar, priced at $14,995,000:
Let’s welcome Gary and team to Compass – this is priced at $1,199,900:
The former model home at Fiore, priced at $1,995,000:
One-story houses in Encinitas have been hot – this one is priced at $849,900:
This is the one-story plan plus granny flat upstairs in La Costa Ridge – priced at $2,100,000:
Kayla’s team has this loft listed for $4,495,000 – here are her two bosses: