(Bloomberg) – Jim Morris is looking for a mansion in South Florida at a bargain price. He has money to spend and few competitors shop during a pandemic. He just needs to find a motivated seller ready to make a deal.
This is what’s left of the US real estate market. With home orders canceling open days and social distancing requiring contactless closings, most buyers and sellers decide to wait.
That leaves opportunistic buyers like Morris, whose food packaging company has moved into high gear. With hungry Americans at home, getting frozen food and other essentials, his income rose 300% in March, he said.
“If your house is on the market, a buyer will assume that it is a sale out of necessity,” said George Ratiu, senior economist at Realtor.com. “If you don’t have to sell now, why would you? There will always be transactions, but the number will be so low. “
Already, there has been a dramatic decline in lists at one time of the year when they generally increase. The number of homes removed from the market doubled during the week ended April 3, according to Redfin.
As sales plummet, house prices will plummet later this year and early next year in “low single numbers” nationwide, according to Mark Zandi, chief economist at Moody’s Analytics. The decline could be more pronounced in the west coast markets, which were already overvalued relative to earnings, he said.
The housing market, typically 15% to 18% of the economy, is virtually closed. Forget the key spring selling season, the Christmas real estate equivalent for retailers. Even summer can be a bust. For transactions that take place, the closings may resemble a scene from “All the President’s Men”.
In Atlanta, real estate lawyer Harold Hudson meets mortgage borrowers in a parking garage. His silver Mercedes has a red and green bow so it’s easy to find. It opens the trunk so that customers can retrieve the documents and leave their driver’s license for verification. A witness stands outside.
Borrowers, who are asked to bring masks and gloves, return to their cars to sign the documents with their own pens. He guides them over the phone. When it’s finished, buyers pick up the house keys in a plastic bag, safely stored in his trunk.
“It can be a bit difficult,” he said. “I never knew that the sound that paper can make on a loudspeaker is so loud.”
Millions of homeowners will double with friends and family in the coming months due to the financial impact of the coronavirus, said Ed Pinto, director of Housing Center for the conservative American Enterprise Institute.
As registrations drop, demand will decline faster, possibly creating an overabundance of available housing that will give buyers more leverage, he said. Nationally, Pinto saw the value of homes slide from 1% to 2% in May from the previous year, and from 4% to 6% in late June.
“We will reach a point in June or July where we will have 10 months of supply,” said Pinto. “After 10 months of supply, house prices are quite badly affected.”
The New Jersey market, for example, is about to crash.
Home sales in the state, second after New York in coronavirus cases, could drop 45% this year from 2019, while prices would drop up to 12%, according to Jeffrey Otteau, president of Otteau Valuation, a real estate group. consultant in Matawan, New Jersey.
“People will be taking their homes off the market and, despite that, it will be a buyer’s market, with low inventories,” said Otteau. “It is unusual. “
So far, sellers have not been racing to lower their prices. The median asking price in the United States rose 1% to $ 309,000 in the week ended March 29, compared to a year earlier, according to Redfin data. The peak of $ 330,000 was recorded a month ago.
According to a study by the New York UrbanDigs listing data website, 52 ads in Manhattan alone registered price drops between March 22 and April 6, up from 663 in the same two-week period. ‘last year.
However, some sellers adjust their expectations. Sadie Mackay, 29, product manager for Amazon.com Inc., who recently purchased a single-family home in Seattle, is about to register her one-bedroom condo near the company’s headquarters. Its location, also near the offices of Google and Facebook Inc., will help. Even so, Mackay has stated that she has no plans to set an aggressive price for her condo. “It will become a hot potato if I can’t sell it for a few months,” she added.
To avoid a complete foreclosure crisis, the government authorizes borrowers to suspend mortgage payments without penalty. The Federal Reserve, which has lowered its key rate to almost zero, has pledged to buy an unlimited number of mortgage bonds. This should help keep mortgage rates low.
Lawrence Yun, chief economist at the National Association of Realtors, says homeowners who benefit from improved unemployment insurance will ideally not be forced to sell properties at unbeatable prices.
The experience of Michelle Medina Bunting, 34, and her husband Tim, 35, who rent on the Upper West Side of Manhattan, suggests sellers are in the mood for discounts.
Last month, the couple made an offer of $ 990,000 for a renovated two-home property in Jersey City, which was expected to cost $ 1.3 million. After some negotiations, they did not reach an agreement and moved on.
“Now this agent calls us and says, ‘Do you want to make another offer? “” Said Michelle Bunting.
Morris, who is still looking for his Florida mansion, considered a nine-bedroom property in Fort Lauderdale with a six-car garage and dock before the coronavirus shut down the economy. The owner insisted it was firm at $ 15 million. But last month, the owner called him to drop 20%.
“I expect more of this – there are going to be situations of distress and situations of distress will lead to opportunities,” said Morris. “I don’t want to overpay because we don’t know what the new market will look like when it’s finished. What may sound like a good deal today may actually be too high. “
(Addition of New Jersey forecasts from the 14th paragraph)
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