Will Birmingham Home Values Be Affected By The Coronavirus Pandemic?
Our planet has been turned upside down. With the worldwide spread of the Coronavirus, or COVID-19 as it is also known, the everyday lives of everyone have been disrupted.
Nearly all areas of the economy have been or will be affected. The real estate market is one area that will most likely feel the ripple of what is currently happening but what will this look like to the normal person and to home values in the Birmingham area?
At the time of this writing, all professional and college sporting events have been canceled. In addition, most restaurants have either shut down or are only serving with a limited staff to handle carry out orders.
Many in the workforce are being laid off or their work hours are being cut back. This will drastically reduce their income and their ability to purchase a home if they are in the market for one. Predictions are that unemployment could reach 20-30 percent.
A Look At Key Housing Indicators
While it is still too early to make any definite predictions as to how this will affect Birmingham home values we can look to some key indicators to see how this is starting to play out.
Closed sales provide the best evidence, especially when compared to previous years, but as I said it’s still a little too early to have enough sales to make any solid conclusions.
There are, however, several other key metrics that we can look at. These include canceled listings, listings put on hold, new listings, and pending sales.
We’re going to take a look at data from the Greater Alabama MLS from December of 2019 until the end of March 2020 to see what trends, if any, are emerging.
Canceled listings – A significant increase in canceled listings can signal that sellers are pulling back because they are unsure how this pandemic is going to play out. They may be scared about having strangers in their homes due to the virus.
The good news is that the data is not showing any significant increase in listings being canceled. This may be due in part to the ability of agents to offer virtual tours of homes.
This can cut down on the number of people actually in the home and can help buyers qualify homes before narrowing down their choices to ones they are seriously interested in.
Temporarily Off Market – These listings would consist of homes on hold that has been taken off of the market for a short period of time. Rather than cancel a listing some sellers may want to take a short pause until the crisis passes.
As you can see from the chart, there has been a slight uptick in this category. From an inventory perspective, it is better to see an increase in this compared to a listing being canceled altogether.
There was already a low inventory of homes before COVID-19 so avoiding even lower levels is key for buyers to have a larger choice of homes to choose from.
New Listings – The overall number of new listings from December to March is down for this year compared to last year. In reality, this probably has nothing to do with the pandemic we are currently experiencing, however it is worth watching.
While it could just be a rhythm of the market if we continue to see decreases then there may be a direct correlation with the crisis, however, only time will tell. As you might expect, a lower inventory of homes could drive prices up even further and affect affordability.
Pending Sales – There appears to be a slight decline in pending sales especially when considering that we’re going into the spring market. It could be caused by buyer reluctance, however, I’m also getting differing signals from agents who are saying that they are writing contracts on listings shortly after they’re listed and they are not noticing any changes.
This could be true in various sub-markets, however, the MLS data for all of Jefferson and Shelby county does show a slight decline. This may be temporary and we could start seeing an upward trend emerge, however, it is worth keeping an eye it.
Pending transactions are important because they are a direct indication of future closed sales. A decrease in pending sales would, of course, signal a decrease in closed sales which would give us a better understanding of what direction the market is taking.
Three additional housing indicators that we will need to keep an eye on include the number of home sales, sold prices, and inventory. I will continue to monitor this and update you through this blog.
Question
What are you seeing with the market if you are in Birmingham or if you are from another area what is it like where you are? I would love to hear from agents about how their buyers and sellers feel about what is going on so please leave a comment below and as always thanks for reading.
Great job crunching the numbers and being on top of these trends Tom. Kudos to you for being your market’s expert.
Thanks, Ryan. It will be interesting to see how the real estate market evolves as the Conrovirus pandemic progresses.
In the Augusta/Richmond County, GA MSA, there were 275 new listings in the last 7 days. In the last 30 days there were a total of 1175 listings; therefore, it appears that is a +/- 25 listing decline in the last 7 days vs. the previous 3 weeks average. Pending sales in the last 7 days were 227 while they were 1114 for a decline of 68 per week over the prior 3 weeks average. Closed sales for the last 30 days were 777 with 192 in the last 7 days or a decline in the prior 3 weeks of only 3 per week(The prior 7 days did include many that were closed in the last 2-3 days of the month of March which is typically higher. Withdrawn listings were 311 for the last 30 days and 72 in the last 7 days. The number of DOM, list to close, appears to be increasing; however, based on conversations with agents and loan officers, this can be attributed to a longer time required to close due current conditions with lenders and closing agents/attorneys. Time will tell………..
Way to keep up with the stats, Pierce. Yes, only time will tell. I think appraisers have a great opportunity to provide market updates to the public and to establish ourselves as market experts. Keep up the great work.