Editor’s note: This report is part of a two-story package examining the impact of the COVID-19 pandemic on the real estate markets in the Triangle and Charlotte areas.
RALEIGH – When North Carolina Gov. Roy Cooper issued Executive Order 121, the Stay-at-Home Order, on March 27, what happened to the local real estate markets across the state of North Carolina, and how were people and families impacted?
Technology has helped keep sales alive. The creation of 3D tours climbed nearly 600 percent at the end of March,according to real estate firm Zillow.
One thing John Makarewicz, President of Mark Spain Real Estate, has observed is that sellers and buyers are much more interested in safety. “Sellers only want to show homes to serious, qualified buyers,” said Makarewicz. “Most sellers demand a mortgage pre-approval letter before showing.” While most buyers aren’t prepared or ready to purchase a home without seeing it in person, said Makarewicz, “they are narrowing their choices before touring.”
Then there are the “iBuyers” – companies that make instant offers. Mark Spain does buy homes as well without sellers having to go through the showing process. But regardless of how homes are listed and sold, Makarewicz isn’t projecting any depreciation in home values in the region, due to the low inventory available in the market.
“Sellers need to be prepared for fewer buyers and potentially longer on market time,” she said. “Sellers in higher price ranges, in particular, should be prepared for a slight move away from a seller’s market into a more balanced, or potentially, even a buyer’s market.” And, every market is hyper-local, said Makarewicz, “consumers should be aware.”
In these COVID-19 days, however, more than technology has been needed to keep the markets open.
“COVID, that all started after we went under contract on our new house and also on our old house,” said Rebecca, whose family had decided to move due to a planned construction project on their very busy street in a suburb of Charlotte. When the listing agent for the house they were planning to purchase requested to shorten the due diligence period amid concerns of a potential county-wide or state-wide shutdown, they accepted the terms and ended up closing earlier than expected.
Yet their agent did not take similar steps to accelerate the due diligence period and the closing date for the house they were selling. “In the end, the buyers asked for a delay in due diligence of 30 days, and they asked for this extension an hour before the due diligence period was set to expire,” she said. “I was pretty upset and anxious about this … I did get pretty nervous that we’d have two houses for a long time and that we were going to be too far overextended.”
Though Section 2.C.25 labeled real estate brokerages as essential businesses in the Governor’s Executive Order 121, legally-binding contracts could be impacted by the spread of the disease in the state.
The North Carolina Real Estate Commission quickly released guidelines on how real estate brokerages should shift operations in order to provide essential services while keeping the public safe, as did the National Association of REALTORS. One such measure was the publication of the COVID-19 ADDENDUM by the North Carolina Bar Association and North Carolina REALTORS Association, which became regular practice to “attach to and made part of the Offer to Purchase and Contract (“Contract”) between Seller and Buyer for the Property.”
‘iBuyers’ – the instant home buyers – coming back in Triangle after COVID-19 blows
“A new form that the NC REALTORS together with the NC Bar Association created,” said NC REALTORS General Counsel Will Martin in Episode 13 of the NC REALTORS Redefined Podcast. “The basic idea behind the form is that if a circumstance related to the COVID-19 pandemic makes it unduly burdensome or impossible within the timeframes of the contract to exercise a right or perform an obligation under the contract, there will be a one-time extension of contract deadlines by a number of days agreed upon by the parties.”
One example is that the addendum states that the buyer and seller will agree, in advance, that if the buyers were unable to obtain a loan to purchase the contracted property due to a buyer’s loss of income related to the pandemic, either party could terminate the agreement, or the contract deadlines could be extended by a period of days agreed to in advance by both the buyers and sellers of the property.
“The buyers were nervous about losing their jobs, and they said they’d walk if we didn’t extend,” said home seller Rebecca, who asked WRAL Tech Wire to omit her family’s last name. Worried that they’d walk away from the contract, the family acquiesced because they were afraid with a canceled contract, the house would stay vacant. “In the end, it turned out okay, and we closed 37 days later,” she said.
First-Time Homebuyers
In their apartment in Raleigh, the recently engaged Sarah Ihlenfeld and Mike Ward hunkered down for the stay-at-home period. A trip to New York City in mid-March had been canceled, where Ward had planned to propose on a bridge in Central Park. Next, he had looked to reserve a beach house for a weekend, only to shift those plans when Gov. Cooper issued Executive Order 121. Instead, the proposal came on a trail at Raleigh’s Lake Johnson Park and was readily accepted.
Ward, a small business owner, was deemed an essential worker in E.O. 121. His chiropractic office, Raleigh Central Chiropractic and Rehab, remained open, providing palliative care for new and existing clients.
“We were lucky, we were considered essential by the governor, and we were considered essential because they wanted to keep people away from the hospital, so they didn’t want people going to the hospital with low back pain,” explained Ward. “I’ve had some new patients who’ve come into me rather than go to the hospital, which was the right decision for them because they were in tough shape.”
Still, his business suffered. “We’re doing the best we can,” said Ward.
Ihlenfeld, who works in talent acquisition for First Citizens Bank, transitioned to working from home. “We weren’t really looking for a home,” said Ihlenfeld, “I just liked looking at homes, because we know that it was something we wanted to do in the future.”
Ihlenfeld found a house, listed on Zillow. Though 3D tours are increasinlg popular, Ihlenfeld and Ward still wanted to visit the property. “We really wanted to see the inside of a home, so we contacted an agent through the app, and she was able to coordinate a visit for us the next day.”
“We took off our shoes, the agent had on gloves, and we were encouraged to wear masks,” said Ihlenfeld. “We decided after that visit to keep looking.”
Ihlenfeld and Ward continued their search, again looking at the listings on Zillow. When they saw a townhouse with a stone exterior that Ihlenfeld loved, and it was listed as vacant, they contacted the agent again to coordinate a showing.
After back-to-back days visiting and touring the home, Ihlenfeld and Ward decided to make an offer. The negotiation lasted six rounds prior to a contract, said Ihlenfeld, and the only major difference is that they’ll be required to wear masks and gloves when the home inspection occurs. They did sign and execute the COVID-19 addendum, said Ihlenfeld, “it’s never something I thought I’d have to sign.”
“It’s a weird time to buy a house,” added Ward. “But we wanted to take advantage of the low interest rates.”
What’s the data say for the Triangle real estate market?
“When people started working from home, schooling from home, we had no idea what to expect from the real estate market,” said David Jones, CEO of Coldwell Banker Howard Perry and Watson, in a YouTube video the brokerage released on May 4.
“Are homes selling?” said Jones. “Emphatic yes, yes they are.” Based on the data available, said Jones, 3,442 homes were sold in April in the Triangle. Though that is down 16 percent from last April, noted Jones, homes are still selling.
“Are people listing their homes?” said Jones. “Yes, they are.” The same data shows that 3,702 homes were listed in the Triangle market in April. (Editor’s Note: The Triangle Multiple Listing Service “Market Trends” reports are made available to the public on or about the 15th of the month for the preceding month, though brokerages like Coldwell Banker Howard Perry and Watson have access in real-time.)
HPW data
Nationally, new listings dropped by 44.1 percent, according to the realtor.com April Monthly Housing Trends Report released last week, though only by 31.4 percent in the South. The data set for the Triangle, says Jones, indicates that this metric is down only 24 percent from last year.
“While both of those are off compared to last year, the surprise is that it wasn’t more dramatic,” said Jones. “The continued strength of this market speaks to its resiliency, creativity in addressing buyers and sellers needs in today’s environment, and the fact that circumstances in people’s lives go on.”
The more interesting data, he added, is the trend line. Overall, the data shows that the average number of home purchases, per day, in April 2020, was 115 homes per day. Yet the trend line is increasing, said Jones, as the month began with just 650–700 homes sold in a week and ending with about 900 sold in the final week.
“That’s substantial upward adjustment in one month,” said Jones, “which reflects the fact that people adapted, and adapted quickly, to the new environment.”
The trend line for listings per day shows a downward slope, however, said Jones. “Current demand is exceeding new supply of homes being listed.” Though April began with about 900 homes listed per week, by the end of the month, only 800 homes were listed per week.
“If you’re considering listing your home and are concerned that homes aren’t selling, you shouldn’t be,” he explained. “If you’re thinking you can’t bear the thought of keeping your home in show condition while you’re working or schooling from home, the good news is that most home showings are happening virtually.” In other words, because in-person showings are now only occurring for those buyers seriously interested and qualified to buy your specific home, said Jones, “it’s the best of both worlds; strong demand and minimal disruption for you.”
HPW data
Though Zillow is forecasting a modest dip in home prices nationally, between two and three percent, Jones is optimistic the Triangle market will be minimally disrupted. “Demand is outpacing new listings, and the inventory of homes for sale in this market is lower at the end of April than it has been at any time during the last three years,” said Jones. “That’s great news for home sellers.”
What’s the data say for the real estate market in Charlotte?
In the Charlotte market, buyer demand is also holding firm. That’s according to Shaival Shah, the CEO and co-founder of Ribbon, a startup with a dual headquarters office located in the Queen City, that continued operations during the North Carolina Stay-at-Home order.
“We saw an initial surge and then softening of total transaction volume driven by low supply of homes on the market,” said Shah. “Buyer demand, relative to the amount of inventory in the market, has held strong, with buyer and REALTOR creativity on how to manage the process in unparalleled times.”
Jennifer Morris, owner and broker-in-charge of Real Estate Central, leveraged Ribbon’s platform to make an all-cash offer and then buy a new home for her and her husband as well as their son, daughter-in-law and grandchild. She then listed their current property.
“Listed it and went under contract in four days,” said Morris. “In the middle of COVID-19 restrictions and everything!” Third parties to the real estate transactions, like inspectors, repairmen, closing attorney, and the Ribbon team, all took precautionary measures throughout the process, said Morris. “The market is still really good, considering,” she added.
“As markets start to slowly open up, we expect homeowners who were waiting to understand the new normal to begin to list homes,” said Shah. “Mortgage applications are up and we expect both buyer demand and home inventory supply to increase over the course of the summer.”
Canopy chart
“I think the next six weeks will go as is, great, and with the lifting of some of the restrictions people will feel more secure,” said Morris. “With the low interest rates, those rates will continue to prove a huge value [for people] deciding to move or relocate.”
The data from March 2020 provided by Canopy Realtor Association, shows 4,254 transactions in March 2020 in the Charlotte region, up 5.5 percent from 2019, and the median sale price was $271,500, up 11.3 percent from 2019.
According to a company spokesperson, Zillow’s data for the Charlotte market showed that for the week ending on April 26, 2020, new pending sales were up 17 percent week-over-week while new active listings were down 30 percent year-over-year and three percent week-over-week. The median list price is within one percent year-over-year.
Given that the March 2020 data from Canopy projected just 1.7 months of inventory, and new active listings are decreasing at the end of April, the data suggests that the market may remain strong. “In Charlotte, we are still seeing multiple offer situations in certain price ranges,” said Makarewicz of Mark Spain Real Estate which specializes in markets in the Southeast. “As long as the economy can safely re-open, our real estate market will continue to grow.”
