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Tag: real estate COVID-19

How COVID-19 has impacted the housing market in Colorado

The novel coronavirus (COVID-19) continues to negatively impact the economy, and the housing market is not immune.

Nationally, the housing market continues to shrink as the National Association of Realtors recently reported. Existing home sales fell again in May, marking a three-month decline in sales as a result of COVID-19.

Overall, home sales fell year-over-year and are down 26% from May 2019. 

In July, there seems to be a market rebound as consumer confidence begins to rise and as mortgage rates hover around historic lows.

Those mortgage rates continue to boost homebuying demand and refinancing activity has picked up as a result. Mortgage applications to purchase a home were up 33% year-over-year in the first week of July, according to the Mortgage Bankers Association’s seasonally adjusted index. This continues to push homebuyers into the market, and this is especially true in Colorado. 

What’s happening in the Colorado housing market?

In terms of the housing market, Colorado has been an anomaly compared to the rest of the country. Our residential real estate market has remained strong despite the pandemic.

In fact, Denver has a housing shortage, which continues to make it a hot market and boost current homeowners’ optimism for selling as there is a lack of supply in the area.

While this supply dipped in April, the July report from the Denver Metro Association of Realtors shows a surge in new listings, up 17% year-over-year. And while home prices were holding steady through June, they are now on the rise as Denver is turning into a strong seller’s market. 

In Denver, people were searching for homes again in June as the economy opened back up and as record-low mortgage rates remained intact.

Real estate agents closed nearly 60% more home sales in June compared to May, and housing prices are still up compared to 2019.

However, the issue of low inventory in the housing market is not new to Colorado and it is what has kept the market hot despite a global pandemic. 

A summer housing boom

Colorado has always been a strong market for vacation homes and that demand is growing, as the pandemic has caused more people look to experience the outdoors.

Further, the pandemic essentially pushed the ‘spring market’ back, and we are starting to see a rebound in the summer months. While realtors are not hosting open houses, many have turned to one-on-one home tours and virtual showings.

According to the Colorado Realtors Association (CAR), virtual tours have increased demand and shaped a new reality for real estate transactions as more people are buying homes without physically seeing them first. 

What our experts are seeing

Even before the COVID-19 pandemic, banks were working with buyers to get them pre-approved and ready to go in this hot market. This has not slowed down much for our buyers during the last several months.

At UMB Bank, our Colorado clients’ average mortgage loan is around $1 million, which requires a jumbo mortgage. A mortgage is considered jumbo if the dollar amount falls above a certain limit, usually above half a million dollars. 

COVID-19 did not have a big impact as inventory has continued to outpace demand, and we believe the rate cut for Denver will keep the purchase market hot and put more consumer dollars into it. There are lots of people looking to take advantage of the low rate environment for either their first home or second home.  

It’s important to remember that it could take anywhere from six months to a year for the market to fully show the impact of the pandemic. But for now, the Colorado housing market remains in a good position. First time buyers should prepare to fight multiple offers, and many people are still on the hunt for a new house, as the need for home offices or simply more space has become apparent for those who are spending more time at home. 

COVID-19 has impacted the economy and daily life in a number of ways, but the Colorado housing market has remained strong in spite of it.

If you’re looking to buy a home, be sure to work with a financial partner who understands the nuances of this unique market and will get you thoroughly prepared to navigate the sometimes tricky terrain. 

Brad Swanson is a senior vice president and private banker at UMB Bank in Denver and can be reached at [email protected]. Narine Avanesova is a vice president and private banker at UMB Bank in Denver and can be reached at [email protected]. 

Ask a Realtor: Are virtual tours reliable for buying a home?

Dear CJ and Jeffrey,

My wife and I were planning to come to Vail in the late spring to look at homes, which got put on hold due to the pandemic. We are very interested in moving to the Vail Valley and looking for a new home but are concerned about COVID safety issues both with traveling and touring properties.

We have heard about the shift to virtual tours and wondering how this process works. Can we get a realistic tour of the home on line and if so, will we need to still come out and do a walk through or can we literally do this all online?

Thanks,
Curious Buyer

Dear Curious Buyer,

Your question is a very timely topic and one we field almost daily. Buyer demand in the Vail Valley and Down Valley has escalated with the easing of COVID restrictions, even more so than anticipated. People, such as your wife and you, are looking for a place to live or spend a portion of their year that offers more access to open space and smaller, more contained communities.

Touring a home these days doesn’t look the way it did at the start of 2020. While important safety and health precautions, such as wearing masks and sanitizing homes before and after tours, are now standard practices, the added potential risks associated with traveling to, touring different properties and staying in hotels, have more buyers considering and using virtual options.

We respect and want to work with buyers, such as yourself, who are concerned about traveling and touring properties. While face to face time is always preferred as a way to get to know each other, safety and comfort level boundaries are also important. This is where virtual tour technology plays a valuable role and one that gives the buyer a very realistic look of a home and its setting.

We’re certainly doing more than we ever have over the internet and conducting real estate sales in a way we could never have imagined even three months ago. We are selling homes without the buyer ever physically stepping foot into the house.

Tips for getting the most out of your Virtual Tour video (buyer and sellers):

  1. While walkthrough videos are pretty standard, it is important to still do a FaceTime/Zoom/Skype a few times before moving forward.
  2. Be sure your broker does an actual live video walk through with you. While the initial video/Matterport/ Property tour gives you the space design and location, “hearing” the home and surrounding sounds are important elements for really understanding the “feel” of the home.
  3. Make sure this is a complete tour; you should see every element and crack — the good & the bad. This helps insure there are no surprises when you actually step into the home.
  4. All paperwork can be done via e-mail /electronically, helping to save time and travel costs if you are out of market.
  5. Make sure you work with a broker who has eyes on properties that aren’t just coming through the MLS feed. A good broker on their game with the focused goal of successfully executing your needs and the needs of clients will take the time to locate homes that haven’t even hit the market.

Good luck in your search,

CJ and Jeffrey

CJ Seatvet and Jeffrey Cloonan are award-winning, associate brokers and Luxury Collection Specialists with Berkshire Hathaway HomeServices Colorado Properties for the past 11+ years. Both have earned top honors, including the Chairman’s Circle Award, as top producing brokers in the Vail Valley and Down Valley. CJ can be reached at 970-376-9010 or [email protected]; Jeffrey can be reached at 970-445-8388 or [email protected].

The impact of COVID-19 on Colorado real estate

After a years-long stretch of unprecedented growth, the Colorado real estate market has slowed to a crawl due to the spreading COVID-19 pandemic.

Though real estate transactions have been deemed essential by the state government, open houses and showings are banned. Closing documents are being signed from inside cars; some home inspections are being completed from outside the property. It’s a tough environment to do business in, and sellers know it: A record 761 listings were pulled from the market in March.

And no one knows when it will end. The Colorado Association of Realtors has lobbied the state government to relax some of the restrictions on the industry; in particular, they’re pushing for scheduled home showings of three people or less. However, no agreement has been reached.

In the meantime, an industry that runs on handshakes and face-to-face networking is muddling through. A recent Colorado Public Radio article describes home inspections done via GoPro camera, sellers who haven’t booked a single request for a showing, and buyers who have decided to wait things out because FaceTime showings aren’t good enough. If it’s any consolation, what’s happening in Colorado is happening everywhere else in the U.S.

The national picture

A recent study by Clever Real Estate paints a portrait of an housing market that hasn’t tanked— it’s just on pause.

A survey of homeowners planning to sell in the next 12 months found that only 15% are proceeding with their original, pre-pandemic plans; the other 85% are scrambling. Of sellers who had already listed their home, 23% pulled the listing after the pandemic shutdown began, and 27% dropped the price.

But nearly all those houses are still going to be sold in the future; only 3% of sellers said they had decided not to sell at all because of the pandemic. Most sellers are taking a “wait and see” approach, with some angling for a quick sale at a slightly lower price.

National data from Realtor.com reinforces these trends. In March 2020, there were 15% fewer active listings, 6% fewer new listings than the previous March, and the number of sellers who cut their home’s list price in hopes of enticing a buyer went up 3% over the year before.

However, buyers have put their plans on ice. The Clever study surveyed renters who were planning to buy a home in the next year, and like the sellers, they had to scramble for a new plan. Two-thirds of buyers (65%) had either totally canceled their home search or delayed it; a small portion (16%) were going ahead with their home search, and 28% were still looking at properties, but intended to push for a deal.

Clearly, these numbers describe a market where the advantage has shifted dramatically toward the buyer. Anecdotal evidence from Colorado sales back this up; one Denver seller recently agreed to a $10,000 window well replacement as a condition of the sale. This would have been unthinkable just a couple months ago when buyers were virtually lining up to throw money at every listing.

How are Colorado renters and mortgage holders doing?

Colorado is one of the few states without an eviction moratorium during the pandemic. The governor has issued a guidance advising landlords to try and avoid evicting non-paying tenants, but they aren’t required to. This policy could lead to mass evictions as more and more tenants fall behind on rent; one attorney group estimates as many as half a million Coloradans could be evicted in the next couple months.

A few weeks into the pandemic, many tenants were already struggling. The Clever survey found that while 73% of renters were paying their rent in full, 13% had stopped paying at all, and 3% had already moved out. The remaining 11% arranged to make deferred or lowered rent payments.

How did it get so bad for renters, so fast? The survey found that 46% of them had less than $500 in savings in the first place; 70% said they only had enough savings to survive two months without working, and nearly half (49%) had already exhausted their limited savings. In a high-cost living area like Colorado, the average renter can’t live on $500 of savings.

Still, many tenants will be protected. The CARES Act put a 120-day federal eviction moratorium in place for properties that have federally-backed mortgages and certain government-owned rentals. Experts say this will cover about 28% of U.S. rentals.

So, what about people with mortgages? Fannie Mae and Freddie Mac are allowing homeowners with federally-backed mortgages (this also includes mortgages backed by the VA, USDA and the FHA) to request up to 360 days of forbearance, during which time mortgage payments will be paused with no interest or fees. Homeowners who don’t have a federally-backed mortgage, aren’t covered by the CARES Act. But homeowners as a group are much better prepared for the pandemic, at least compared to renters. The study found that 47% of homeowners had more than $5,000 in the bank, which is almost identical to the percentage of renters who had less than $500 in savings.

What does this mean for the market?

When the market comes out of the deep freeze, it’s expected that supply is going to come roaring back, while demand is going to take a little longer. With so many people exhausting their savings or losing their jobs, the number of serious, qualified buyers will be limited. And the ones who remain won’t be shy about asking for price cuts and concessions. Add to that an economy that’ll remain on shaky ground for at least the next several months and sellers will likely be eager to save every penny, accelerating the trend toward discount and 1% commission options. In high cost-of-living areas like Colorado, where the average commission fee is around $15,000, home sellers will be looking to save on the sale and shelter their equity.

Investors and landlords, facing record levels of rent non-payment and high vacancy rates, may be forced to sell en masse if their properties are no longer turning a profit. While this may suggest a dip in home prices, with disrupted global supply chains, homebuilders are having trouble getting basic materials to begin construction on new housing. Any potential supply glut from stressed homeowners would likely be offset by this decrease in new construction.

Overall, the conventional wisdom that home prices stay firm or even strengthen in a recession looks to be a safe bet. This isn’t 2008; that recession, after all, was caused by the housing market. When the pandemic passes, every indication is that we’ll soon be back to business as usual, in Colorado and in the rest of the country.