The Author During a Recent Home Showing
A number of my currently active South Pasadena real estate clients have asked me about the current market in 91030 and exactly what they can expect if buying a property. Here are a few of the items we cover when discussing how to enter a real estate transaction in the era of Covid-19.
First and foremost is safety. That means safety for the buyers, the sellers, the buyer’s agent and the seller’s agent. By now we’re all familiar with the general guidelines for interacting with one another here in greater Los Angeles. These guidelines are essential for conducting a safe home search and purchase.
The Pasadena-Foothills Association of Realtors (PFAR) recently published clarified and updated guidelines for their members. These are the rules combining the safer-at-home orders from both the County of Los Angeles and the City of Pasadena as applied to real estate agents.
- No open houses.
- Residential viewings must occur virtually.
- If a virtual viewing is not feasible, then an in-person viewing of the property may be done by appointment only.
- Showings should be limited to serious potential buyers who are either pre-approved or have submitted a contingent offer.
- The in-person showing may only include the Real Estate Agent and no more than 2 visitors, who reside within the same household or living unit, at a time.
- Sellers and/or tenants should temporarily leave the residence / unit during the in-person showing, in order to maintain social distancing.
- During the in-person showing of the property, all social distancing protocols must be adhered to, and protective measures, such as the wearing of gloves, cloth face coverings, and no touching of surfaces must be followed.
You can also view the Covid-19 guidelines in their entirety below.
House Shopping with a Client During the Coronavirus Pandemic
Seeing the Property
While it’s unlikely that most buyers will submit an offer without stepping foot onto the property, there are alternatives to viewing a property in person in order to narrow your preferred properties. All of the following materials can be accessed from the socially-distant comfort of your computer or phone. These include:
Photos and descriptions available from the seller’s agent. Most of my buyers are already experts at assessing properties listed online on sites like Zillow, Redfin and Realtor.com.
Video tour – there are now many more video tours available online which usually accompany any new property listing.
Virtual tour or 3-D rendering – an interactive rendering of a property which allows you to point and click your way around the property. You can focus in on the areas of particular interest.
Extra photos of specific property details or a live video feed from the seller’s agent. If the generally supplied materials and description for a home isn’t sufficient for a buyer to judge the details of a property then additional details can often be provided by the seller’s agent. I’ve had seller’s agents take measurements of specific areas within the home and also offer to walk through the property on a facetime video chat with the prospective buyer directing them on where to point the camera.
Is Now a Good Time to Buy? Are Property Prices Going Up or Down?
With so many complex variables and a completely unknown future ahead of us, it is very difficult to predict where home prices are headed. However, I still get these types of questions from buyers – because they look to me as the expert in South Pasadena real estate. Here are a few of the variables I try to factor into my thinking when assessing the directionality of property prices in 91030.
Supply and Demand
Ultimately, the price of real estate is determined by the number of motivated sellers and the number of well-qualified buyers. While the inventory of homes for sale in South Pasadena has been low for the past few years, the market has definitely shifted in the past few weeks as both buyers and sellers have pulled back dramatically. Recent data suggests that property listings have been reduced by at least 27% in Los Angeles County – and this is just in the first few weeks of the crisis.
The attitudes of sellers seem to be that they are reluctant to have unknown persons wandering around their property during a pandemic. Further, the restrictions on open houses and in-person showings mean less people will even be able to view the property. There is also the economic fallout from the pandemic that is causing huge business disruptions. This may indicate to sellers that the number of active buyers has been decreased. All of the above factors contribute to sellers either pulling homes off the market, putting them on hold, or simply waiting to even list them for sale until the Covid-19 pandemic has abated.
The attitudes of buyers are similar. That is – many buyers are uncomfortable entering a home which isn’t theirs during a stay-at-home mandate. It is impossible to know how many other people have been in that home recently and whether or not those people are positive for Covid-19. Even if a buyer is currently in solid financial shape with loan pre-approval, that doesn’t mean they are optimistic regarding the future. With fewer properties on the market, buyers may feel that their choices are limited as well.
Many Sellers Have to Sell
All of this uncertainty is also creating opportunity. A shift that is clearly happening is that only the most motivated sellers are currently putting properties on the market. Therefore, a buyer can assume that any property listed for sale since the stay-at-home order was issued is for sale because it has to be. The seller may need to move, or has gotten divorced, or needs the cash – whatever the reason – it is most likely urgent. There are also sellers motivated by timing. These sellers think that the economy and real estate markets are going into economic free fall – and would rather unload their property today than in a month or two.
Another clear shift is that properties are not being quickly purchased or bid up in a multi-buyer frenzy as properties were in the past year preceding the Covid-19 pandemic. This means that as a buyer – time is on your side. Before Covid-19 I would counsel my buyers to be ready to act within days of a property coming on the market. Additionally, almost every offer I wrote for buyers in the past year has been counter-offered with stricter deadlines. The seller’s were asking for short time periods for inspections, shorter time periods for appraisal and loan contingencies, and a faster close of escrow. In the past few weeks my buyers have been relaxed when considering properties. The seller’s agents have been following up with me to see what my clients thought of the property – and if there was anything else they could provide to help my clients decide. This indicates to me that quality buyers are now a scarcer breed than they were in early 2020.
Why It’s SO Hard to Determine the Current Market Price of a Home
Home prices are based on SOLD properties. Since it takes around 30 days under “normal” circumstances to close escrow and take possession of a property – and now it is taking even longer – there just hasn’t been enough time (or sales volume) to arrive at the true “market price”.
I would further want to understand the motivation and mindset of the seller. A great realtor can gently discuss the seller’s current situation with the seller’s agent. Divining the motivation and attitude of the seller can inform a buyer’s offering price. For example, if a seller thinks the real estate market is crashing – they are motivated to get out NOW! This can present a strong buying opportunity. Remember as well that fear is a powerful motivator. Uncertainty can lead to decision-making based on emotion and not reason.
There are economic indications that the housing market is being pressed lower. Specifically, over 26 million Americans have filed for unemployment within the past few weeks. In California alone nearly 3.4 million workers have lost jobs due to the pandemic and associated shutdown. That’s one out of six California workers who have become unemployed in just a few weeks.
New Coronavirus Forms are Now a Fact of Real Estate Transactions
Let’s say you’ve seen pictures and a virtual tour and think you’ve found an excellent property to buy. How do you go take a look? Well, step 1 is you fill out a newly created California Association of Realtor’s form entitled: CORONAVIRUS PROPERTY ENTRY ADVISORY AND DECLARATION aka C.A.R. Form PEAD, 4/20. This is a document that promises you aren’t currently sick, will follow all state, city and local guidelines on Coronavirus protection – and you won’t blame the seller if you end up getting Covid-19 after visiting the property (among many other things).
You will then follow the PFAR guidelines listed above to safely view the property.
In the event you are ready to make an offer – you’ll need to also include some or all of the following new documents: the CVS, NUCC, and the RLA-CAA. These new addenda all provide protections for both buyers and sellers in case a real estate transaction is interrupted by Coronavirus.
These are now standard forms that every realtor will be using in the era of Covid-19. You’ll be seeing them if you transact anytime soon.
Pros and Cons of Being a Homebuyer at This Moment
Interest rates are historically low;
Competition is lower – there are fewer active buyers;
Buyers may have more negotiating power (pricing and contingencies);
Time may be your friend – not your enemy;
Those who are brave and act quickly could snag a great deal.
Low inventory of available homes;
Unrealistic seller pricing expectations (hysteresis);
Difficult to view some properties (buying without stepping foot in the house);
Current and future home values are less certain;
Overall economy may enter into freefall;
Rents may be falling;
As defaults or non-payments rise – it is possible that lenders will tighten up lending standards even further – thereby limiting the money you can borrow.
Real Estate is Still Considered the Best Investment
Here’s a final thought on real estate as a long-term investment. Gallup is a well-respected global analytics firm whose polls and research are market leaders. A recently conducted survey (data collected from April 1-14, 2020) reveals that real estate is considered to be the best long term American investment. From the summary of the research: “Real estate, remains the most favored investment to Americans, as has been the case since 2013, when the housing market was on the rebound. More than a third of Americans have named real estate as the top investment since 2016.”