The emerging impact of COVID-19 on the Austin real estate market
Last week when I shared information about how the real estate market fared in past recessions it was too early to tell what impact, if any, the coronavirus would have on Austin home sales. As the situation unravels we are starting to get a better sense of where the market may be headed.
I’ve been tracking the market closely so that I can appropriately advise our buyers and sellers on what moves to make during these uncertain times. Real estate is deemed an essential service because people still need to buy and sell homes. However, the Austin market is understandably shifting. It’s been years since I’ve talked about the Austin market trending downward, but that seems to be where we are headed.
Here’s how things are looking as of Friday, April 4th. We will know more as time goes on.
Are Austin homes selling?
Yes, but the scene is changing. One of the most immediate indicators of change in the Austin real estate market is the number of pending home sales. A pending home sale is when the buyer and seller agree to a contract outlining the terms of purchase.
Austin’s first diagnosed cases of COVID-19 were announced on Friday, March 13th. Real estate moved forward as usual for about a week, but by the second week (March 22) we started to see a decline in pending contracts.
Why are pending home sales on the decline?
There are many factors contributing to this shift. For example, some home contracts are being cancelled or delayed because buyers are concerned about the economy, have lost their jobs, or are experiencing their own economic hardship. We’ve had out-of-state buyers cancel their trips to Austin to search for homes because of travel restrictions as well.
Sellers are also changing their plans. The number of homes for sale, known as our housing inventory, was already low before coronavirus. Now, some sellers are opting not to sell at this time and removing their homes from the market because they are worried they won’t get top dollar in a time like this, or because they don’t want strangers coming through their home, or their own job situation is no longer stable.
The declining number of buyers means we don’t have as many people actively searching for homes. Conversely, as sellers opt not to put their homes on the market, it makes it more difficult for active buyers to find a home to purchase. And so the cycle continues…
The number of withdrawn listings is on the rise
Another key indicator is whether sellers are taking their homes off the market. A seller can withdraw their home from the market completely or they can temporarily take it off the market. In both cases there was an increase after the first Austin diagnosis of COVID-19. The charts illustrate this new seller behavior. For example, in 2019 we had almost zero homes temporarily removed from the market, but in 2020 we saw a sharp increase in those numbers.
With residents being asked to shelter in place, this shift makes a lot of sense. Many sellers (and Realtors) weren’t ready to host virtual showings through Zoom, Facetime, or other technologies.
Where have all these listings gone?
Just because a listing is removed from the MLS (the database Realtors use to search for homes) doesn’t mean they aren’t still for sale. Some listings, like all of ours, are currently being marketed through private networks. Others are holding out while they are sheltering in place.
We hosted a special video conference with our Compass colleagues in Seattle (Julian Aguirre), New York City (Annette Akers), and Carmel by the Sea (Jennifer & Andrew Oldham) to learn from their experience. Since they are all ahead of Austin on the coronavirus curve, it was insightful to hear about the changes to their daily life, how the coronavirus is impacting real estate sales, and their expectations for recovery. What we are seeing in Austin isn’t far off from where they were weeks ago. If you’re curious, you can check out the recorded interview below.
What’s all this mean for you?
If you are a buyer, finding the right home just got a little more complicated. While new homes are still being listed, be sure to ask your agent to search (1) the private networks, (2) the homes that were recently withdrawn, and (3) those homes that are temporarily off market. That way you can be sure you are seeing all of the potential inventory. It’s not ideal, but you may be able to uncover some opportunities.
Also, take some precautions before heading out to look at properties with your agent. Drive by the home, attend some virtual open houses, and ask for a virtual tour before you arrange to see it in person. Once you do decide to see a home in person, make sure your agent is taking every precaution to keep you safe. They should cover their face, open the door and turn on the lights so you don’t have to touch anything, and then give you adequate social distancing space to see the property.
If you are a seller, and you can afford to wait this out, we recommend that you wait to sell until the shelter in place order is lifted. In the meantime, let us or your agent market your home through our extensive private networks. You can learn more about listing your home as a private exclusive here:
If you can’t wait to sell and your home is vacant you can go ahead and list your property on the MLS. Just realize that we only have about half of the normal demand we’d see in the typical spring market. With that said, oddly we are still seeing multiple offers on homes so it’s bit of a gamble. We are here to talk you through it and support you however we can.
If you are living in your home and you want to sell it, that’s a more complicated situation. As with buyers, there are some definite precautions we want you to take to stay safe. Fortunately, we are well versed at using video and other tech tools to get your home maximum exposure online. We have your back and have some well thought out ideas and options that we are happy to explore with you.
If you are an investor, we still think real estate is hands down the best investment anyone can make. Austin real estate certainly isn’t fluctuating at the same crazy pace as the stock market! We are still in a vibrant city with a high demand for real estate. We don’t see property values coming down, and we expect Austin to continue to thrive. There will be opportunities that arise, and we are keeping an eye out for those. To that end, we are still sending out our weekly updates on multi-unit properties for sale. These are some of the properties I like best right now. Reach out if you’d like to be added to the email list.
A word of caution and a word of hope
First, I want to share a word of caution. I’ve worked through -- and survived -- several recessions during my real estate career. In tough economic times, folks can get a little desperate for business which can lead to some hyperbole. To that point, I’ve already started to see other Austin Realtors post on social media about how the Austin real estate market is still going crazy and encouraging people to buy and sell. Sigh. We are fortunate to live in a city that will likely bounce back quickly, but as these stats show we ARE seeing impact from the coronavirus, and there’s likely more impact to come. So… Ask lots of questions, test what you are being told, and seek out a second or third opinion before jumping into something as significant as a real estate transaction. We are happy to chat and share our candid opinion any time.
Second, with so many of us spending more time at home, a nice home means more now than it ever did. That’s not going to change. Most companies that were planning to move to Austin will still move. Most buyers that are relocating to Austin will still relocate. It’s all just delayed. It may even be that we will see more migration from densely populated areas that have been hard hit by the coronavirus.
Wherever this scary situation takes us, we’re here for you. Take care of yourself. And if you’re so inclined, we’d love to hear from you and know that you’re okay.
April 5, 2020