June 17, 2020
On Day One of each of our New Jersey real estate licensing seminars, we always ask our guests, “Why do you want to get a New Jersey real estate license?” The answers are always varied and interesting. Any time one deals with customers, it is always important to understand the customer’s motivations.
But nowadays, the class often peppers our real estate instructors with their own inquiries, and uppermost among them is one question:
How will the Coronavirus pandemic affect the real estate market?
My crystal ball is in the shop for repairs right now and so with the caveat that you can’t hold me responsible for these predictions, here is my take of the current real estate market—and predictions for the second half of 2020.
The market hates uncertainty.
The markets abhor uncertainty, regardless of whether it is in stock market, in mortgage rates or the real estate marketplace. The past couple of months have seen wild swings in stock prices, wiping out significant portions of our savings. And with 40 million Americans unemployed, any previous predictions for 2020 are almost worthless.
Mortgage companies, for example, no longer simply check on an applicant’s current employment status. They now check right up until the day of closing to ensure the borrower is employed. They even require the buyer to sign an affidavit at settlement confirming that they have no reason to doubt the stability of their job in the months ahead.
Imagine a seller whose REALTOR® has sold his home and helped him buy another, only to discover the day before settlement that the buyer of her client’s home just lost his mortgage commitment.
The year got off to a great start. Coming off a momentous 2019 of great sales in both resales and new home construction, 2020 looked like the low inventory of homes for sale, historic low mortgage interest rates, and a strong stock and employment market would make for a record year.
And then came March.
Who could blame sellers from delaying their home sale or buyers from delaying a new home search when the nightly news covered little else every day but the tragic stories of hundreds of thousands of our fellow citizens dying from Coronavirus? Who wants to be applying for a mortgage to buy a home when millions of us were losing our jobs, businesses were shutting down, and the stock market in which our savings had been placed were dropping by hundreds of points several times a month?
By April, newly-listed homes plummeted 44 percent over the same month a year earlier and days-on-market began to increase after more than a year of homes selling faster than in previous years. The Greater Philadelphia statistical metropolitan area showed the nation’s second-largest decline in resale home inventory.
However . . .
Life is not all about statistics. One of the axioms I cite most often is, “Figures lie and liars figure!”
I speak to 5 to 10 real estate agents and managers every week when they call to ask when we have upcoming real estate school classes for people inquiring about real estate careers. Without exception—literally, without exception—every real estate professional I have spoken to in the past month has reported that they are busier than at any time in recent memory.
It seems that national confidence is growing as more states gradually open their economies. Mortgage interest rates are still low and the real estate industry has quickly transformed its modus operandi to operate in a virtual world. Home showings, open houses and even settlements are now conducted at a “social distance.”
Most economists suggest the housing market will remain fairly strong for the balance of 2020—in part because of the low inventory of properties for sale, combined with the low mortgage rates and the gradually strengthening economy.
However, the economy, the aftermath of the election and the predictions of a resurgence of the COVID-19 pandemic have led many of those to suggest the housing market will see a softening or decline towards the end of 2020 and into 2021. Home prices have already flattened year-over-year and are predicted to stay essentially flat for the remainder of this year.
Citing another of my favorite axioms: “Economists have correctly predicted 10 of the last three recessions” leads me to warn that if the Coronavirus pandemic either returns in a more or less serious form, or if mortgage rates and housing inventory change more significantly than has been predicted, then this could all change.
Either way, the opportunities are still there.
Why is that?
Despite the bad news we have all heard lately, real estate professionals have incredible opportunities that are available in few other professions. Regardless of the economy, people will always need to buy and sell real estate. People get married, people get divorced, people need to buy bigger homes when their families grow and smaller homes when it’s time to downsize. People need to sell properties when family members die, and other people need to buy and sell rental properties for their investment portfolio.
And unlike doctors, hotel staff, hairdressers and airline employees, REALTORS® cannot be fired (unless they break the law!) They can fire themselves by failing to do what is necessary to succeed, but the opportunities are certainly there for real estate professionals to have very successful careers—regardless of the real estate market.
If you, or somebody you know is considering a real estate career, Garden State has pre-licensing classes that run during the daytime and other courses that operate three evenings per week. Right now, people in any location can take advantage of a real estate education at the top-ranked real estate school in New Jersey because we are teaching those courses on Zoom! We also teach experienced Realtors® broker licensing licensing and continuing education classes.
David C. Forward is a licensed real estate broker and instructor and was first licensed as a Realtor® 31 years ago. During his career, David and his business partner sold more than 450 homes in South Jersey. He is now School Director of Garden Real Estate Academy, has won numerous awards for real estate sales, is a much-requested public speaker who has addressed audiences on six continents and is the author of 15 books. David can be reached at David@GSREacademy.com