Yeah, you wouldn't think there is any silver lining to this coronavirus plague for the Chicago real estate market but I can find at least one change with a positive spin. But first let's focus on the far more noticeable negative aspects of our current predicament.
We've been dealing with this for at least 6 weeks now and the data seems to be settling down - but settling at a much lower level of activity than is normal for this time of year. For the week ending April 11:
- New listings were down 62% from last year to 217 homes
- Contract activity was down 56% to 145
- Inventory in absolute terms was down 13% to 2795 homes
- However, in relative terms inventory was actually up from 9.8 weeks of supply to 19.3 weeks - a higher number than last week
- New listings were down 61% to 343 homes
- Contract activity was down 67% to 176
- Inventory in absolute terms was down 9% to 4951 homes
- Inventory in relative terms was up from 10.2 weeks of supply to 28.1 weeks - also higher than last week
It should be be a good time to be a buyer. There does not seem to be much, if any, impact on market times - yet - but with inventory levels so high I would imagine that longer market times and lower prices are inevitable in the short run. However, in the longer run I think the inventory levels are going to adjust because of the dramatic decline in new listings. Most of the current inventory was put on the market before all hell broke loose so the sellers have already committed to the process to some extent. But as properties sell and listings expire that number is going to shrink in both absolute terms and relative terms though I have no idea how long that's going to take.
How Coronavirus Has Changed The Buying And Selling Process
The real estate industry has certainly been shaken up by recent events. As I've mentioned in previous posts the iBuyer business has basically disappeared overnight. Also, independent of any government directives, some/ many home buyers and sellers are really skittish about going into other people's homes or having strangers come into their homes. I think that has a lot to do with why new listings are down and why contract activity is down. Perhaps these people are optimistic that things will get better soon so they hope to wait out the virus. But if we go down the road with this monster another month or two people may just resign themselves to forging ahead despite the risks.
In the meantime, the real estate industry is trying to adjust the best they can. Realtors are shooting more videos and creating more of the 3D virtual tours for their listings. In addition, more of the initial showings are happening virtually via FaceTime, Zoom or Facebook Live. Also, with Zoom at least, you can record the showing so that if one of the buyers is not available at the scheduled time they can watch it later. I think once this becomes a more accepted practice we might hang onto this convenient approach.
I also hear about another unusual practice where buyers and sellers will actually sign a contract before the buyer has seen the home in person but it is contingent upon the buyer seeing it at a later date. Redfin claims that in a recent week 12% of their offers were written this way and a recent NAR survey revealed that 1/4 of realtors had a buyer put a contract on a home without seeing it. We've done this before and I'm not crazy about it. These deals can easily go off the tracks when the buyer realizes that the photos/ video didn't do the home justice - but not in a good way. I would caution our sellers from entering into an arrangement like this.
I've heard that appraisals have also become problematic lately as a result of a one-two-three punch. First, a lot of appraisers don't want to go into people's homes. Second, a lot of home sellers don't want appraisers in their home or they are requiring the appraisers to follow considerable precautions. Third, the industry has been inundated with a tidal wave of refinances. All of this is combining to push appraisals up to 4 weeks out.
At least partly in response to this appraisal backlog three federal regulatory bodies decided that under certain circumstances it would be OK for lenders to complete the appraisal up to 120 days after closing. That's not a typo. I'm sure there are a lot of nuances to the program but it looks to me like they are going to check the barn door after the horse has left.
But one good thing has come from all of this. You are now allowed to close on a home in Illinois without having to physically sit down next to other people at a table. The sticking point has always been the requirement that a notary be in the room with the buyers in order to confirm their identity. However, the office of Illinois' secretary of state issued guidance in conjunction with the stay at home order which allows a notary to perform this function remotely via camera. This change was long overdue so here's your silver lining.
#RealEstate #ChicagoRealEstate #Coronavirus
Gary Lucido is the President of Lucid Realty, the Chicago area's full service real estate brokerage that offers home buyer rebates and discount commissions. If you want to keep up to date on the Chicago real estate market or get an insider's view of the seamy underbelly of the real estate industry you can Subscribe to Getting Real by Email using the form below. Please be sure to verify your email address when you receive the verification notice.