Reading-Berks Real Estate Outlook Post COVID-19
Looking into the future with little or no reference from the past can be difficult. In real estate, it is like trying to figure out what a house is worth when there is no past comparable sales. The COVID-19 pandemic and the issues it has wrought leave us with a mystery as to what the future holds relative to home sales. But as with every mystery, there are clues.
Predicting the future is a task readily asked of most Realtors. "What will someone pay for my home" "When will it sell" "When is the best time to put it on the market" "Should I buy now or wait" "What will interest rates be" and so on. Often, we Realtors depend on our experience and market data to help us with our prognostications. Unfortunately, the COVID-19 pandemic will leave a big fat asterisk on many upcoming market evaluations, thus making the business of real estate speculation more difficult. For example, statistics like days on the market have less meaning when people are not allowed to go and see a home physically.
What Clues Do We Have
Back in January of this year, just before news of the COVID-19 pandemic started to gain traction, there were 685 homes for sale in Reading, PA, and Berks County. Today there are 544 available, according to Bright MLS, a decrease of just over 20 percent. In March of this year, 448 homes went pending sale compared to 451 in March 2019, almost no change. In April 2019, 594 homes went pending, or 19.8 per day average. So far, through April 9th, under a shelter-in-place order, 24 homes went pending sale, nearly 2.7 per day, an unsurprising drop of 86 percent. It will take more time to evaluate the impact the COVID-19 shutdown will have on sold homes, but the early figures on home values look promising.
Before the pandemic home inventory was at historic lows. The scarcity of available homes coupled with record low unemployment and low-interest rates caused median home values in our area to increase ten-plus percent year over year.
What My Real Estate Experience Tells me
Home inventory likely will remain historically low. The wild card could be jobs. After all, banks don't loan money unless the borrower has an income, and the vast majority of those incomes come in the form of gameful employment. The most significant factor is how long we will be closed for business.
I believe that if Pennsylvania lifts the shelter-in-place order before the end of May, yes, I said May, buyers will get to the market quicker than sellers. Many will be eager to find suitable shelter before any future events like the one we are presently experiencing. The federal government's ability to flood the economy with capital may help prop up employment and initially curtail a recession. Flooding the market with money could also cause some degree of inflation. Inflation can cause interest rates to rise, but I doubt that will happen given the present climate.
In my last article, "Is Real Estate a Life-Sustaining Business," I stated that my first thought of what is life-sustaining involves four things, food, water, clothing, and SHELTER. Once Pa lifts the SHELTER-in-place order, buyers will likely want to get settled in their SHELTER quickly just in case it is a window and not an end to the issue.
All these factors could lead inexorably to one conclusion; available homes could become as rare as toilet paper and hand sanitizer.
If you are looking to buy a home this year, I have one suggestion, be prepared. If you are looking to sell, get ready now. Get hooked up with a Realtor now and create a solid game plan. There is plenty we real estate agents can do without personally meeting.
And what if the shelter-in-place order lasts through the summer? Not even my crystal ball is that clear. Stay safe and well!
Knowledge is Power!
Jeffrey C. Hogue