Appraising

Is the Novel Coronavirus Impacting Home Values?

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I must admit, two weeks ago, when I wrote my last blog, I really had not planned on writing about the Coronavirus and its impact on market value. However, it is something on all our minds. How could it not be? After all, many are now at home, doing their best to isolate themselves with the goal of slowing the speed of the transmission of this virus. Except for my appraisal work, which generally does not involve a lot of direct contact with people, me and my family are also staying home, heeding the wise guidance of the authorities.

Many of the homes that I inspect are vacant, or not yet built. I am also seeing more “drive-by” appraisal orders come over. Those are appraisals in which an appraiser can observe the home being appraised from the street, and then use that exterior observation, in connection with data available by the homeowner and other data sources such as the County Auditor, MLS and other numerous data sources.

Yesterday I was driving around doing my appraisal field work.  The streets felt like a Sunday morning. There were very few cars on the road. As I took pictures of homes, many people were home. Many were taking walks enjoying the warmer weather. I have been practicing social distancing myself. I did go into a Panera Bread to get some food to go. There was only one other customer. The dining room was roped off. There were only a few workers behind the counter, and they looked very depressed.

This week, while most homes were vacant, I did have several inspections scheduled in which the homeowners were going to be at the property. A couple of days ago, I had a 4pm appointment. The borrower was a doctor. He was on call. He had to reschedule his inspection due to the hospital calling him in early. Not surprising!Novel Coronavirus

I received another call from a homeowner that hired me to appraiser their home, for the purposes of establishing a list price. My client is in her 70’s. She cancelled the appraisal for now. She told me that she is scared, and that she didn’t want to put her house on the market, only to have massive numbers of potentially infected people walking through her home for showings. She said she will call me in the summer when things settle down. Hopefully things will be better by then. I told her that I completely understand! I think that is a wise move.

You can be sure that the these types of things are now happening all over the country.  While this is the case, in the past couple of weeks, my phone and email have been blowing up with orders. Why? The primary reason is that rates were recently dropped to levels that are incredibly low. People are trying to refinance in order to take advantage of these historic rates.

The big question on the minds of many homeowners, and appraisers, is “Is the Coronavirus impacting the housing market?”

IT TAKES SOME TIME

The answer is yes. After all, how could the current things taking place not affect the housing market? While this is the case, we are going to need a little time to see it in the stats. When it comes to external influences impacting buyer’s motivations, its good to remember that value starts in the minds of buyers. At this very moment, some buyers are no doubt thinking about several things.

For instance, has being forced to remain at home for weeks, and potentially months, caused some to decide that they either cannot afford to buy a home now, or feel that it is not prudent to do so? Others, like the example I gave earlier, are postponing selling their home out of fear of contagion. They are opting to wait until later in the year before selling their home.

Since there has been a lot of talk about the world already being on the brink of a economic recession, some may be wondering if the current world situation will lead to just that. If that’s the case, is it smart to purchase a home when prices may decline soon? Or, feeling like we are likely at the top of the housing market, should a person sell their home now, before they take a hit on their value? All good questions. Frankly, I think the answers depend on the individual situations that people find themselves in. It’s not a one size fits all scenario.

There are no doubt countless other concerns on the minds of buyers right now. But right now, these are just thoughts. These thoughts will translate into motivations which turn into actions, or lack thereof. As I already noted, it is going to take a little time to begin to see.

Here is a map of the COVID-19 outbreak, taken from Bing.com on 03/18/2020.

Covid19 Map

This map gives us some useful information. However, the data above is historic and not completely accurate. At this point, there are no doubt many more cases than this map is showing. There are many people who likely have Coronavirus, that have not been tested yet. For instance, today (03/20/2020), the day I am posting this article, according to the coronavirus.ohio.gov website, there are now 119 confirmed cases. That number is going to continue to increase for a while. Therefore, while helpful, this information doesn’t tell the whole story. Today’s stats are really a snapshot of the past.

The same is true when it comes to pulling neighborhood housing statistics. It is a little early to see how the Coronavirus outbreak is impacting the housing market. The trends may not yet indicate much. As the weeks and months go on, it will be much clearer to see what impact the COVID-19 outbreak is having on the housing market. We will have to wait and see.

The first signs of impact are usually seen in listing and pending sales prices of homes. The other thing to keep an eye on are inventory levels. Interestingly, there has been a shortage of inventory in many parts of the country for years. That may be about to change. We will have to wait and see.

Most people, including myself, tend to think of things in their worse case scenarios. While that is not always inappropriate, since we don’t know exactly how things will be impacted, there is no sense in putting too much emotional energy in believing that the worse will happen. That only wastes precious emotional energy on things that may not happen. Be cautious and concerned. Be smart. Go buy some more toilet paper if it helps. But leave some for others also. Even cats are panicking about toilet paper shortages! (Keep an eye on your cats. They go through a lot of TP)

THE HOUSING MARKET WILL BE NEGATIVELY IMPACTED

A person doesn’t have to be an economist to see that the housing market will be impacted negatively by this situation. How can it not? While the economy has been strong for an impressive run, the truth is that the economy has been fragile for many years. In my market, which is Northeast Ohio, despite years of a housing inventory shortage, values are anemic at best, with appreciation rate in many areas below 1% per year. That is not the same in other major cities in Ohio. And, clearly, that is not the case in many major cities across the country. But this situation may be coming to a city near you soon.

Truthfully, only time will tell. One of the issues in my market area is affordability and market uncertainty.  Additionally, many people don’t have a lot of savings. According to CNBC in February 2020, nearly 1 in 3 American workers run out of money before payday. That includes those earning over $100,000. On the Today Show this morning, it reported that already, 78% of the U.S. workers live paycheck to paycheck. 

Let that sink-in for a minute. Now, add the current situation in which people are being forced to not work for a couple weeks, and potentially much longer. On 03/18/2020, the Today Show reported that 18% of U.S. respondents said that they have had their work hours cut or lost their jobs due to Coronavirus. How could this situation not effect the economy and subsequently the housing market?

While some are being paid, not all Americans will be paid for their not working. As an appraiser, when things slow down for me, no one pays me for not working. Most appraisers are paid per report. There are millions of professionals in this situation.

HOW YOU CAN HELP APPRAISERS

I’m not a germaphobe, however, I am taking this virus very seriously. I think everyone should. Listen to the authorities. Right now, I am wearing gloves on every appraisal. I sanitize my car interior frequently. I am not shaking hands, even with my gloves on, and I am keeping some distance between me and homeowners and real estate agents. Fortunately, as I mentioned earlier, many of the homes I am appraising are vacant or not built yet. I also appraise a lot of luxury homes, which are very large and open in terms of space.

If you are a homeowner and have an appraiser scheduled to come over to look at your home, please let the appraiser know if you are sick or if you have been directly exposed to another person who has contracted COVID-19. No matter how much you need the loan, the appraisal can usually be postponed for a couple of weeks, which in most cases will not affect your loan. I ask every homeowner if they are sick, or if they have been directly exposed to someone with Coronavirus. If so, I will not make an interior inspection. If I become sick, I will do the same.


Remember the Golden Rule! 

Treat others the way you want to be treated. This is a serious situation that could cost someone their life. We should behave accordingly.


Happily, most people are! That is awesome!

I hope that you all stay safe out there! This will likely pass at some point. The best thing to do is to make smart decisions every day. Whether it is buying a home, social distancing, social media posts, purchases and anything else for that matter.

Since we are all a little on edge, I thought it would be a good time for some humor. While there is nothing funny about the situation, I’ve always felt like in times of stress, a person can laugh or cry. I choose to laugh.

funny 1

Funny 2

By the way, toilet paper shortage is nothing new! Enjoy this little clip from December of 1973!


Here are some links to other articles and videos I enjoyed recently! I hope you will also…

Friday The Thirteenth And Coronavirus Pandemic Makes Housing Take A Backseat – Housing Notes by Jonathan Miller

Is Your Home Interior FHA Compliant – Home Value Stories (PODCAST)

Buying an island, uncertainty & pendings – Sacramento Appraisal Blog

CURB-SIDE APPRAISALS / The Solution to COVID-19! – Voice of Appraisal with Phil Crawford (PODCAST)

What Homeowners Can Do To Assist The Appraiser During The Coronavirus Pandemic – Birmingham Appraisal Blog

Coronavirus & Inspections – AVM’s & Wonder Bread (Thanks to Ann for sharing my article!) – Toilet Race – APPRAISAL TODAY

 

4 thoughts on “Is the Novel Coronavirus Impacting Home Values?”

  1. The Johnny Carson link was hilarious. Thanks you for that! As I am over 65, my PCP has directed me to shelter at home. On my last couple of inspections I did as you — keep a distance, wear disposable gloves, plus I wore shoe covers. and sanitized my tools, car, etc. Stay safe out there!

    1. Hi Cynthia! I’m glad you’re staying safe at home and taking precautions! Hang in there. I will be safe also! I’m glad you liked the Johnny Carson video. We all need a little comedic relief right now. Keep in touch. Let me know if you all need anything. My best to you and your family!

  2. Gotta leave a comment here. I wont’ be social distancing with your blog Jamie. 🙂 Nice job as always. These are unprecedented times. What a time and market we are living through. I was talking with a data scientist yesterday and I told him the pandemic is truly unsettling, but from a market perspective it’s fascinating.

    1. LOl! Hi Ryan! I’m glad you and your family are doing well! Yes indeed. These are truly unprecedented times! I also find this situation very fascinating. It’s going to be a very interesting year. We are all watching to see what’s next. I enjoyed your post this week as well! Hang in there and give my best to your family!

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