Real estate agents Heather Roy and Learka Bosnak hosted a “virtual open house” over the weekend. Broadcasted on Instagram and Facebook Live and carefully maintaining six feet of separation, they showed off skylights, hardwood floors, and other features of a four-bedroom bungalow in Hollywood listed for $2.4 million.
“The strategy in the current market would normally be to have an open house and have 200 to 300 people going through, but we couldn’t do that,” says Roy. “We wiped everything we touched down. Our clients were really happy because we were still able to show the house to a lot of people.”
With public health experts advising people stay home, and keep at least six feet apart when interacting with others, even the physical process of home shopping is a challenge. It’s an unexpected challenge for buyers and sellers, in what was shaping up to be a hot year for the Los Angeles real estate market.
With low interest rates bringing buyers to the market, and a relatively small pool of houses and condos available for sale, real estate analysts predicted prices would rise even beyond all-time records set in 2019.
But that was before the novel coronavirus pandemic.
An economic letter published Tuesday by the UCLA Anderson Forecast and the Ziman Center for Real Estate predicts a pending recession that will place “stress” on the local real estate market.
“It will not be a pretty picture over the next few months,” the authors conclude.
Zillow economist Jeff Tucker says video tours and even 3D animations will probably become more common ways for agents to show homes in the coming months.
“Agents are adapting,” he says. “I expect it’s still possible to do real estate transactions with a minimal amount of risk of exposure [to the virus].”
Roy says she and Bosnak are thoroughly vetting interested buyers before showing them the Hollywood house in person. She also says they’re prepared for the possibility that even that might become impossible, should Los Angeles adopt stricter measures to limit the spread of the virus.
“If the city says no one move, we’re not going to be showing a house,” she says.
That’s close to what health officials have instructed at this point. The County’s “Safer at Home” order, announced Thursday, restricts group gatherings to 10 people at most, and requires organizers to provide places to wash hands and ensure guests remain separated by at least 6 feet.
Tucker says evidence from previous pandemics suggests that real estate sales drop sharply when viruses are spreading most quickly. Once the pandemic ends, sales pick back up again.
According to a report released by the real estate listings site this week, the number of homes sold in Hong Kong plummeted during the 2003 SARS epidemic—but home prices “did not fall significantly.”
Tracy Do, a real estate agent with Compass, says that there’s been a “definite slowdown” in the level of buyer interest over the last few weeks, but that she isn’t slashing listing prices, except in cases “where sellers need to accelerate their sale timeline.”
Tucker says it’s possible that prices won’t be affected much by the virus, but that it will be telling to see what happens in China, where home sales nearly came to a complete stop in areas hard-hit by the pandemic.
“That’s something that had not happened in any of our historical examples,” he says.
Even in the days after Los Angeles County officials declared a public health emergency, real estate agents say interest from buyers was strong.
“We’ve been extremely busy. We’ve had a number of offers—18 offers—on one property,” Compass agent Tracy King said earlier this month.
Do says things started to change last week.
“One buyer on a new listing escrow has gone M.I.A.,” she says. “Some clients in the entertainment industry are taking a pause on their home search because productions have shut down until further notice.”
Roy says she’s hopeful that sales will continue, even if authorities mandate that Los Angeles residents shelter in place.
“Whether you’re moving for a job or having a baby... people’s lives are going to keep changing through all of this,” she says. “Some people have been working really hard to be in a position to buy a house.”
Comments
Anyone who does not need to sell right now – don’t! don’t create more inventory. hold off and when we finally see a light at the end of the tunnel, we can start to list homes again. Agents – hope you saved up some of your commissions because many of you will not see a commission check for who knows how long. On the positive side, my mortgage broker is busy as hell with all the refi’s and new purchase loans with lower interest rates.
By LAoneWay on 03.19.20 8:57am
Too late. Won’t work. People are going to lose their jobs and will be forced to sell what they cannot afford to keep.
By Stay Curious on 03.19.20 11:37am
Aren’t you the #1 housing cheer leader. You’ve got everyone’s interest except the buyers. Let me guess, you bought a house in the past year or two and you’re peeing in your pants that the L.A. housing bubble is gonna come crashing down?
By fkacct on 03.19.20 5:25pm
no. I have a few properties we’ve owned for a long time with very low mortgages so I can weather this. And I don’t think people will be forced to sell even if these lose a job. There will be protections in place to prevent foreclosures – banks don’t want to foreclose either.
By LAoneWay on 03.20.20 7:20am
Except mortgage rates have already spiked back up to 4.75 for a 30 year fixed.
By EastsiderOfTruth on 03.19.20 9:45am
That will kill the real estate market quicker then a virus
By mrjim1 on 03.19.20 10:14am
Average 30 year fixed was 3.88 as of yesterday.
By LADude on 03.19.20 12:21pm
That will hurt sellers, but not necessarily well-qualified buyers. At a given affordable monthly payment, a buyer doesn’t care what percentage of that is interest on a mortgage and what percentage is purchase price. So higher interest rates will simply be offset by lower purchase prices, but to those lucky enough to keep their jobs over the next few months, this won’t mean much.
By Greyvagabond on 03.19.20 3:13pm
These higher rates are a temporary blip because loan brokers are overwhelmed with business. They’ll trickle down to where they should be, given extraordinarily low treasury and bond returns. Be patient. I am (and I just refinanced).
By kcp1 on 03.19.20 8:50pm
Are we approaching the time when we can come in and "sweep up properties for pennies on the dollar"?
By theolder310 on 03.19.20 10:27am
It all depends if the economy rebounds within a few months, or if we’re stuck in depression for years. If it’s the former, I think the demand will just get pent up and then released later in the year and we see a strong fall season. If it’s the latter, then I would expect to see the housing market to fall substantially as people’s wealth gets wiped out from an extended shutdown.
By DoctorVenkman on 03.19.20 10:37am
There is no chance the economy rebounds in a few months. What in the world makes you think that could happen? Businesses are going bankrupt nationwide. It’s going to be the largest series of bailouts you’ve ever seen. The dollar is going to collapse, along with everything else (including homes).
By Stay Curious on 03.20.20 4:59pm
no – it will be a big slow down in activity, including construction. prices may fall but at some point this will be in the past and people always need a place to live so it’s not just about investing like the stock market is. If you don’t own you rent and there is competition for rentals just like houses. If everything goes to shit then none of this matters. Nobody will be buying anything and you’re money won’t be worth anything either.
By LAoneWay on 03.20.20 7:24am
It’s already too late to sell if you were flipping houses. Interest rates are going to rise significantly, and home prices are going to plunge to 2014 prices by 2021 or 2022. There is no possible way we avoid a severe recession because the stock market was in a gigantic bubble. This is great news for people looking to buy in the next few years. This is bad news for the idiots thinking home prices would continue to climb and pretending like 2008 never happened. There’s going to be a flood of new inventory when the banks finally do foreclose on the homes that have been sitting since 2009. Prices in areas like Northridge, Granada Hills are going to see a 40% drop in prices.
By Stay Curious on 03.19.20 11:35am
Prices in shitty neighborhoods will drop significantly which should help poor people. Prices in good neighborhoods will likely drop slightly then go up again when all of the people who have been waiting to buy see their opportunity. And I’m not sure where you are getting that interest rates are going to go up. If you’re in a recession interest rates go down, especially in today’s debt-based economy.
By LADude on 03.19.20 12:26pm
This is a good take. Everybody buying on the margins will take a haircut, and you might be able to score a decent deal on a condo in Santa Monica over the next few months, but nothing will really change.
I expect a few places in the Valley will cool off. And that’s fine.
By Greyvagabond on 03.19.20 3:14pm
I was talking about bank interest rates for home loans. They are already up since last week.
By Stay Curious on 03.19.20 10:40pm
Whoah, Stay Curious! It sounds like you’re all excited about plunging real estate prices. Don’t hold your breath. We are still weeks away from knowing if/when there will be any kind of significant drop in real estate prices. Comparisons to 2008 are way off, this is a different type of event with a different dynamic in play. In ‘08 homeowners were over-leveraged. In ’20 there is way more equity in the market — which will dip for sure! But it’s a cushion. When you see "for sale" signs up and down your block, then you can worry. My guess is most people will weather this storm, and believe it or not banks (and the Federal government) might become their partners in this effort. No one wants a repeat of ‘08, and we’re much better monetized to avoid that kind of crash.
By Spam Peckinpah on 03.19.20 3:52pm
You’re right in that it’s a different kind of event, because the recession is going to be much worse than 2008. Housing prices might even go below 2012 levels. I wouldn’t count on it, but the whole world economy is going to collapse this year. Just watch and wait. Interest rates will go up at banks, but home prices were already overpriced due to an artificial limit on inventory. All that is going away, starting this Fall. The crash won’t happen overnight, but by 2022, you will see a 30-40% drop (or more) in Los Angeles.
By Stay Curious on 03.19.20 9:39pm
We already have a severe housing shortage. From the 2008 recession, we learned that the present mix of rising unemployment and interest rates will lead to a reduction in housing construction. At the same time, those that purchased within the last 10 years had to satisfy stringent underwriting standards, while benefiting from historically low interest rates.
All of this suggests to me that prices are likely to increase as the number of homes offered for sale drops, and new housing starts take a hit.
By TopWeinerDog on 03.19.20 3:29pm
I don’t get you. How do you assume that the reduction in housing construction is caused by unemployment and high interest rates? We’ve had a decade of very low unemployment and interest rates and this has not resulted in increased construction!!
It’s more likely that very low interest rates and flippers/speculators have significantly added to the increase in housing prices….especially in big cities like Los Angeles.
By fkacct on 03.19.20 5:15pm
There is no real shortage. There’s tons of people living in homes that the banks have not pushed the tenants out of. The banks and investors have tried to keep the supply short to increase price, and it has worked. However, the party is over and 2020-24 is going to be really hard on the sellers. The banks and investors will be forced to sell off what they have left just keep their doors open.
By Stay Curious on 03.19.20 9:41pm
Stay Curious, at this point you are inventing things that aren’t real. I like a good conspiracy theory as much as the next person but "tons of people living in homes that the banks have not pushed the tenants out of."? This statement is based on what data, what fact?
Also – builders would LOVE to build more homes in LA! And this would probably bring prices down, at least a little. But it’s very expensive to build in LA (high cost of land, raw materials, labor), and extremely difficult as well due to the rules, regulations and procedures that make LA a challenging environment for developers. Factor in neighborhood push-back and it’s a big headache, so they take their projects elsewhere.
I’m neither pro-build or anti-build, but these are the facts.
By Spam Peckinpah on 03.20.20 8:16am
Research Peter Schiff and George Gammon. They called this right. It’s no conspiracy — you haven’t done enough homework.
By Stay Curious on 03.20.20 5:01pm
Fun conversation and fun to see that people operate on vastly different economic assumptions. Rising interest rates? Based on what? Lower interest rates? Likely to prop up the economy. See that the central banks already are pulling out all stops to pump liquidity into the market. Only thing is the concern on GDP growth, potential rise in super-low unemployment rates and buyers holding off as (paper) wealth has evaporated in the stock market.
While there is an asset bubble due to all of the previous huge liquidity in the markets, fundamentals per see look stronger (No over-leverage of consumers, banks have better capitalization, companies have stronger balance sheets, etc.). But I do expect that the virus induced slow down will cause a recession. How big? I have no clue as I do not yet see through all of the general panic. And this is a fairly new event but it is an events-driven slow down and less one driven by fundamentals.
Despite cheap money, I have seen a reduction in other asset categories such as art or classic cars. That started round 2014/ 15. Granted, those tend to be a tad more volatile as they rely more so on discretionary spent but money moves where money wants to go. Lots of people did cash out of the market so liquidity should not be an immediate concern. But how much the housing market will be impacted over the next 6 – 18 months, I don’t know except that I anticipate a slow down with a looming recession. Fun times ahead. Cash in hand for buying opportunities in a few asset markets. We shall learn more as we go …
By Mike Baum on 03.19.20 6:35pm