Ask Me Anything (AMA) with C.A.R. Chief Economist, Leslie Appleton-Young
California Association of REALTORS® Chief Economist Leslie Appleton-Young, recently joined us for an interactive and informative Ask Me Anything (AMA) webinar to discuss COVID-19’s impact on the real estate market. In the course of an hour, co-hosts Kris Vann, Head of Corporate Marketing at Side, and Side Co-Founder, Hilary Saunders, covered everything from financial relief programs for agents to potential bright spots on the horizon. There’s a lot to cover, so let’s dive right in.
● Market predictions:
Expect to see “some softening, but not too much”. The California housing market has suffered from an under-supply of homes for several years, and every effort is being made by Washington to avoid the experience of 2008-2010 when foreclosed properties flooded onto the market. We hope it will be enough.
● Not like last time:
Appleton-Young emphasizes that framing is important. This is not the same as the 2008 housing market crisis in any way; today, we’re dealing with a global health emergency.
● Mortgage interest rates will come down:
Rates have already come down some, and the quantitative easing measures put in place by the Fed are starting to make an impact.
● Financial relief programs:
C.A.R. set up a hotline set up to answer agent questions about the relief programs available to them through the CARES Act, which was signed by the President on March 27, 2020.
● Virtual expansion:
Shelter-in-place will not be completely limiting; agents are innovating, adopting virtual tools, and providing service from a safe distance. These changes will help speed the recovery process.
● Operating in the spirit of service:
Appleton-Young encourages agents to focus on checking in with past clients and nurturing relationships with your existing network.
● Bright spots:
Once this is over, we may see that people are drawn to suburban living, a change in work-life balance that impacts homebuyer needs, and agents with mastery of a broader spectrum of tools that allow them to provide better service to clients.
COVID-19 Impact on the Housing Market
Q: Do you have any market projections for when shelter-in-place lifts; nationally, state-wide, or locally?
Appleton-Young says, “It's impossible to give you one number without a whole lot of assumptions about how you get to that number. One of the things that's so frustrating about what we're going through is the level of uncertainty. Every single day you get a new piece of information. [First, it was] we're going to be okay by April 12th - now it's going to be into June.
So the big question for the housing market is the same question for every other part of the economy. When will we get back to an economy where people can meet, there is commerce, and we’re not living in fear?”
Appleton-Young points to the fact that before this all started, the housing sector was in a very strong position. She says, "The latest pre-virus data we had was February sales data. We saw the strongest numbers we had in two years. Metrics were up 8% year-to-date and 6% year-to-year. Median price was up 8.5% on a year over year basis. Inventory was down, active listings were falling as the market picked up, and the high end of the market that had lagged a bit a year or two earlier was strong in the fourth quarter."
She continues, "Literally almost overnight, but certainly, within three weeks, everything changed, and things just stopped. The big question is - how long is everything going to be shut down?" She anticipates COVID-19 hot spots like Los Angeles and the Bay Area will be hit harder than areas with fewer cases, but even with all things considered, her projection doesn't assume the worst.
Appleton-Young says, “I think you’re going to see a bit of a pullback in prices, but I don’t think it’s going to be very big because supply is so constrained. The question is, are we going to see a flood of foreclosures? It’s not likely to happen [because] we know how to fight [it thanks to] the last war in Washington. We’re not going to let those things happen again. So I believe we’ll see some softening, but not too much.”
Q: Unemployment projections are suggesting a peak of 30%. Doesn’t that put us closer to the 2008 crash?
Appleton-Young says, “It's going to be a big number. During the Great Depression, the unemployment rate reached 25%. During the financial crisis, it reached 10% - so there’s a lot of variation.” She reiterates that framing is important when she says, “The point of reference is a natural disaster, not a recession like we had 12 years ago.” It’s also important to remember that the Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, passed by congress, opens up unemployment benefits to many Americans who were previously unable to access them.
That said, Appleton-Young explains, “All sales volumes have been impacted 100% at this point. In our weekly look at the market from the MLS data, it's just been marching down in terms of closings. I think it's going to bottom. Then, as people figure out virtual transactions, it'll come back up a little bit.
In a sobering tone, she continues, “This is a watershed moment. The most pain in the market is at the moderate and lower end of the income spectrum. Losses by tech executives are real, but they're not going to mean - do I buy bread, or do I buy milk?”
Recovery Expectations and Advising Clients
Q: Are we stuck in this limbo until shelter-in-place is lifted?
Appleton-Young says, “It’s too soon to tell definitively, but not too soon to think creatively, about how the world will work after this. I think we’ll get moving again even under shelter-in-place.” C.A.R. is tracking virtual efforts by agents via weekly flash surveys, and recent numbers show big promise in finding workarounds to a lack of in-person options. In fact, 45% of agents are now offering virtual tools, a rapid response to open houses being shut down.
Q: How should we be advising our buyers and sellers at this time?
Appleton-Young suggests approaching every past client you’ve had in the spirit of service. She encourages humanitarian check-ins; see how your prior clients are doing, find out what’s happening with everyone, and strengthen your connections.
As for real estate being listed as an essential service, Appleton-Young points out there are many cases when listing or purchasing a property can wait, but there are certainly some where it cannot. She explains, “Members are frequently coming to me, saying, ‘I've got this situation with a grandmother, and she's going into assisted living.’ She needs to sell, or they need to move. It isn't a discretionary situation - these people are in trouble, and they need to transact real estate.”
In cases such as these, she encourages agents to move forward where possible but asks that you first visit the California Association of REALTORS® website and to follow their guidelines on how to safely navigate transactions amidst COVID-19. She adds a caveat that city and county jurisdictions take precedence over anything outlined here, so it’s important to be fully informed and adhere to local guidelines to comply with the law.
Financial Relief and Silver Linings
Q: What kind of economic relief is available for agents?
Appleton-Young shares that C.A.R. has taken an active role in helping agents navigate the financial implications of this global pandemic. They set up a relief hotline designed to provide help with securing small business express bridge loans, economic injury disaster loans, and enrolling in the Paycheck Protection Program.
She mentioned that forms for the Pandemic Unemployment Assistance program aren’t available yet, but hotline representatives will be able to point callers to those forms as soon as they become available. Side also put together a post on current financial relief options, which you can find here.
We anticipate some interruption and change, but we’ll take it on as it comes and will continue to communicate with our clients on a regular basis to keep them updated on notable changes and market impact.”
Q: What are some opportunities or bright spots we can anticipate as we make our way through COVID-19 and out the other side?
Appleton-Young says, “I've been reading a number of articles that talk about what society is going to look like after we get out of this.”
A few observations worth noting:
● Commercial Struggles Breed Residential Invention:
Appleton-Young says, “Commercial real estate is going to have a really tough time because people will not be able to pay - and not everyone is going to go back to work in the same way.” However, these struggles could translate into some creative possibilities in terms of creating more residential housing, especially in markets with tight inventory.
● Agents Become Better Equipped:
As iBuyers have shut down, we’re seeing an overall shift to virtual tours and tools that can help agents provide a broader range of services moving forward. As we mentioned earlier, a flash survey out to a select group of California agents showed that 45% of agents surveyed are doing more virtual tours now than they have in the past.
● Work-Life Balance Shift:
Appleton-Young anticipates we’ll see more people starting to transition to a different kind of work-life balance, where they work in and out of the office in more equal parts. This concept makes in-office logistics more complex - but on the plus side for agents, it encourages homeowners to purchase larger homes with enough space for a dedicated work area.
● Suburbs Becoming More Appealing:
Appleton-Young says, “Are people going to be more cautious? Are they going to do less travel? Are they going to spend less? Or, on the other hand, are they going to be more attached to having a wonderful house than ever - with a yard and space from their neighbors? We may see a resurgence of suburban living, as people see dangers and being kind of too dense and too close.”
Though there’s no way to definitively know what will come of this, she notes that “these are all important questions to think about now, as you plan to hit the ground running when we get the green light.”
In a broader sense, she says, “People are re-figuring their priorities, really living in their homes, and are connecting with important people in your life in a new way.” And that’s the kind of perspective shift that can only be learned through experience.
As always, huge thanks to Leslie Appleton-Young for taking the time to sit down and chat with us this week. We look forward to continuing to work with you in the future as we navigate whatever comes next.