The bungalow in Alameda, Calif., was too much for one person, so after her husband died last year, Sheila Smith, 57, decided to sell her house. She painted, cleaned, and staged the property. It was ready to go.
Then came coronavirus and California’s shelter-in-place order. Potential buyers can’t visit Smith’s home in person, so Smith has decided against listing the property for now. If she did, it would likely sit on the market—and properties that spend many days on the Multiple Listing Service ultimately sell for less than they might have, because potential buyers assume they are defective.
Now Smith is paying rent on both her new apartment and her old mortgage, with no real end in sight. “I can pay both for a few months by dipping into my savings,” she says. “I’m trying to stay optimistic.”
Across the country, the COVID-19 epidemic has thrown the spring housing season—expected to be a strong one—into disarray. In the 17 states, 26 counties and 10 cities where people are being urged to stay home, the market has all but ground to a halt, even as sellers look for hacks like digital walk-throughs and curbside appraisals.
As recently as December, the National Association of Realtors predicted that home prices would grow by 4.3% in 2020. Last week, the organization said it no longer stood by that number and so far hasn’t offered a new guess about this year’s market.
Even so, people still want to sell houses. Their success depends both on their state’s shelter-in-place status and on the ingenuity of market participants.
Shelter in place
Samantha Dardano, an agent for Colorado Home Realty in Denver is still selling properties in the city's robust housing market. “The majority of sellers are moving forward,” she says. Colorado has no shelter-in-place order and the Denver metro area is very much a seller’s market. “We had ten buyers per listing before the pandemic,” Dardano says. “If we go to five buyers per listing, that’s still pretty good.”
Other Denver-area agents, however, are seeing the market slow. “Sellers are questioning whether they should sell their houses and buyers are a little more skittish,” says Renee Cohen, a Denver-based broker with Coldwell Banker. “I’m not telling people to hold off on listing, but I am telling them that their traffic is likely to be low for the foreseeable.”
The difficulty of showing homes in a pandemic is just one reason that market activity is down. The recent stock market slide has also made some would-be buyers less wealthy, a big problem for the upper end of the market.
“The market for entry-level, first-time homes is still moving,” says Melissa Richards, also a Denver-based broker, adding that buyers typically fund these purchases with wages. “The $800,000 to $1.5 million market is slowing a little bit, and the luxury end of the market, which in Denver is $2.5 million to $30 million, shifted to a more balanced market a while ago. Those sellers need to find an equal or better place to move, and that can take time.” The latter two groups, Richards says, generally use invested wealth to buy their homes.
Richards recalls a retirement-age seller whose income comes from investments. “When the stock market took a dive, she didn’t feel nearly as wealthy.” The client had all but signed deals as both a seller and a buyer, and her decision to take her home off the market caused a chain reaction. “It affected at least four transactions,” Richards says. “The people who would have bought her house have decided to stay put for the moment. The people whose house she was going to buy are going forward with a sale.”
Hand sanitizer everywhere
Though buying and selling continues in states with more mobility, it isn’t entirely business as usual. Sellers are putting out hand sanitizer and wipes, showing homes using FaceTime, and taking other precautions against the coronavirus.
In Bothell, Wash., Real Living Northwest Realtors’ Stephanie McCarthy asks prospective buyers to sign a document saying that they’re healthy and have seen pictures and videos of the home they want to visit. Buyers bring hand sanitizer to homes where all the lights are on and every door but the front entrance is open, so there’s nothing they need to touch. They take off their shoes or wear disposable booties, and they clean anything they’ve touched with disposable, disinfecting wipes. “We want serious buyers only,” McCarthy says.
McCarthy used those precautions last week to sell a Kent, Wash., home for Jennifer Dahlman, age 59, who is retiring and moving to Nevada.
“I put about 55 percent of what I own in boxes in the garage, and then I went to town with the cleaning,” Dahlman says. “Before each showing, I used a dilute bleach and water solution on the knobs, switches, and anything else someone might touch with their hands. When I came back to the house, I did the same thing.”
During the showings, Dahlman says, “I walked around the block or went to a parking lot and read a book in my car.” The home sold in two and a half days for $40,000 more than Dahlman’s asking price.
Arguments and threatened lawsuits
Back in California, not every seller is as resigned as Alameda’s Smith. Rick Cunningham, who owns 27 real estate agencies in California and Hawaii from his base in Santa Monica, California, says that some sellers want their agents to show their homes and hold open houses, despite the governor’s order. “Some sellers are threatening lawsuits. I understand that they’re scared and that money is at risk. We’re trying to get them the result that they want, and we have an obligation to follow the law and the rules,” he says.
Some buyers are also calling in attorneys. “We’re still closing business that was in the pipeline. Some buyers have tried to get out of deals, and sellers are trying to hold them to it,” says Cunningham. The buyers, he says, are arguing force majeure: an unforeseen, unpreventable event that keeps them from fulfilling their contracts.
Sellers’ agents are using virtual tools to show houses, Cunningham says, with banks allowing drive-by and video appraisals, and with final walk-throughs handled on FaceTime. In properties where a seller has agreed to make a requested repair or addition, sellers are often giving the buyer a credit at closing, so the fix can happen when the pandemic has passed.
Getting retrofit compliance, which certifies that the seller has made government-mandated changes, is more difficult. “It’s a legal requirement to get retrofit compliance, and the only way you can have that is to get someone to inspect the property and also someone who can do the work if it isn’t up to current code,” Cunningham says. “We’re taking extra precautions when people go in.”
Not many buyers are happy to buy a home they can’t see in person. “That’s a lot of risk on a $1.5 million purchase,” Cunningham observes. That’s slowed the market considerably. Cunningham estimates that his business will decline by 80 percent over about sixty days this spring.
When the market returns, however, he predicts that it will return with a vengeance. “We’re writing contracts that say that, within 48 hours of the shelter-in-place order being lifted, we will list this property,” Cunningham says. “The market will still be there.”
Looking for money tips? Read: 5 Productive Things You Can Do While In Quarantine