June 5, 2020 (Courtesy the Jacksonville Business Journal) The coronavirus pandemic has jolted the U.S. housing market back to listing levels last seen during the depths of the Great Recession and is wiping billions in potential sales commissions off the table for real estate brokers.
A Business Journals analysis of pricing and supply data provided by Zillow Group Inc. makes clear the COVID-19 crisis has reversed what was shaping up to be a banner year for the residential real estate sector. As of April 5, daily new home listings had plummeted 27 percent nationally from where they were a year earlier, with some of the country’s largest and strongest markets seeing declines ranging from 36.4 percent in San Francisco to 56.6 percent in New York City.The fallout has immediate implications for the hundreds of thousands of real estate professionals who earn much of their annual compensation during the busy spring selling season. Nationally, the Business Journals estimated the drop in home listings could equate to as much as $81 million in lost sale commissions per day for real estate brokers, with major metros such as New York ($14 million per day), Los Angeles ($4.8 million) and Chicago ($3.8 million) topping the list with the most at stake.
In the Jacksonville metro area — which includes Duval, St. Johns, Clay, Nassau and Baker counties — new listings have basically remained flat, with about 150 homes hitting the market at the beginning of both this month and the beginning of April 2019.The number of new listings at the beginning of April also fell only slightly from the new listings at the beginning of March, when around 160 homes were put up for sale.
The number of active listings in Jacksonville is down about 7 percent from a year ago, slightly less than the national drop of 8.3 percent and far below the 30 percent drops seen in several California cities.
Despite ominous market indicators Alex Sifakis, president of real estate investment company JWB Real Estate, said he isn’t worried about the First Coast’s residential real estate market.
“I don’t think we will see our market crater,” Sifakis told the Bsuiness Journal Wednesday. “COVID-19 leaves a lot to be known, but residential real estate is a safe place to be in this downturn.”
Sifakis pointed to the Jacksonville area’s low-by-historical-measures inventory as a sign that the area was already booming. He said that even if demand for homes was cut in half, the available home inventory supply would only rise to a healthy six-month time period.
The months’ supply is the ratio of houses for sale to the number of houses sold, indicating how long the current for-sale inventory would last given the current sales rate if no additional new houses were built.
“Honestly, we’re seeing less of an impact locally than we thought we would,” Sifakis said.
It’s a different scene across the country, where the prognosis for a near-term recovery does not look great. Moody’s Investors Service said last week it was adjusting its housing outlook due to the coronavirus and is predicting home sales will fall about 25 percent below targets for the year.
The credit-ratings firm said the new forecast of 4 million unit sales would be on par with the lows registered during the 2008-09 recession.
“The spring home-buying season will be marked with few open houses and risks are rising that the early portion of the summer home-buying season will be uncharacteristically poor,” wrote Moody’s economist Brent Campbell.
Springtime can account for as much as half the annual compensation doled out to brokers, listing agents and the various staff at real estate firms, according to data from Zillow and the U.S. Census Bureau. And
CORONAVIRUS AND HOUSING: IT’S NOT ALL BLEAK
During an interview this week, Skylar Olsen, Zillow director of economic research, cautioned that all is not lost and signs point to a robust rebound when the U.S. economy regains its footing. Olsen also noted a number of significant differences between now and the housing crisis that was central to the 2008-09 downturn, namely that housing inventories already were tight leading up to the COVID-19 crisis versus the oversupply leading up to the last recession.
Homeownership rates also are much lower this time around: under 65 percent today versus roughly 69 percent in 2006, at the height of the housing market’s froth before the fall.
She said the demographics that contribute to longer-term trends in the housing market — when younger generations of potential homebuyers reach an age where they are willing and able to buy — will not change because of the pandemic. “This is a timing issue,” Olsen said.
Much will depend on the effectiveness of the federal stimulus and a willingness among banks to grant temporary mortgage forbearance for homeowners. Olsen said another variable is the unprecedented speed at which the housing market has contracted and upended an industry that largely eats what it kills.
“Of course timing absolutely matters for an individual,” she said. Olsen predicted the sector will see a broad contraction as the response to the pandemic plays out.
Meanwhile, Jacksonville’s housing market is continuing to grow, with the number of housing starts in Duval County last week hitting the highest level yet in 2020, with work beginning on more than $22 million worth of homes. And if the government keeps stimulating the economy and the coronavirus pandemic ends in a reasonable period of time, Sifakis said this could end up being a boon for people in the market for a new home.
“Rates are good now, but in 30 to 90 days, when the banks aren’t so overloaded, the interest rates for capital will drop even further,” he said.
If so, meeting the needs of those buyers will require real estate professionals to continue being creative with their marketing, with drive-by appraisals and virtual open houses, whereby real estate agents stream live video tours of houses on demand, having become common.
“We’re trying to increase the ease of opportunities for buyers and sellers through technology,” Watson Realty Corp. President Ed Forman previously told the Business Journal, with the company going virtual with tours, open houses and even real estate license training. “This is going to change how we do business moving forward.”
Zillow said realtor-generated 3D photo tours of homes spiked 188 percent in March compared to February, with the last week of the month seeing a 488 percent jump over the average number created before the COVID-19 crisis ensued.
The company said such tours skyrocketed by 2,000 percent for landlords of multifamily properties during the same week in March.