New Normal?

Spring got off to fast start in the Charlotte Real Estate market. Homes were listed and under contract with multiple offers before the end of the day. But then……

Rumors about this new Corona virus started springing up, and next thing we all knew, Stay-at-home issues were ordered for Mecklenburg County, and shortly thereafter, the entire state.

Now, there are lots of questions and uncertainty. Will the market bounce back? Can I list my house? How can I still buy a house? What will happen with the banks?

North Carolina is incredibly strong in so many ways – the people are great, business has been booming, and in this particular time, we are incredibly lucky to have such gorgeous weather. People can get out and walk, the flowers and trees are blooming; everything looks so beautiful it’s a shame to miss it by staying indoors. But still, in a time where restaurants are closing or ending dining in, businesses are forced to lay people off, and school is online for everyone and travel has come to a screeching halt, there are many questions.

Here is some information about the market as it pertains to the Charlotte area.

• The demand for homes here is still very high – believe it or not, many homes are going under contract here sight unseen! New strategies are being employed to allow this to happen, giving buyers an opportunity to get under contract, perhaps with significantly reduced competition as other people are waiting at home for the stay-at-home order to be lifted. Some buyers are able to negotiate in ways they previously could not in the hyper active market we were seeing before the virus.
• The Charlotte area still has low inventory in terms of homes. A “healthy supply” nationwide is typically around six months supply. In the Charlotte area that number is lower than average for a “healthy” market. Going into the virus we were below that number, causing a frenzy in buyers – and the multiple offer situations. Interestingly, the appraisals had not caught up to the market conditions, causing homes to go under contract quickly and above asking price, but then the transaction wouldn’t close because homes didn’t appraise.
• The virus has caused turmoil in the financial markets. People have lost money, as well as jobs. This often trickles down to homes and mortgages, but there is a lag time typically between the economy and its impact on real estate. In normal times the lag is 12-18 months.
• In order to help boost the economy, the rates for borrowing have dropped to record lows. There was a temporary spike in the rates because so many people rushed to refinance. As the banks have struggled to keep up with demand, they temporarily raised rates to stem the tide. The federal government purchased trillions of dollars of mortgage backed securities to shore up the markets, and rates are again low. As a borrower, it is a great time to lock in one of these extremely low rates. The process is a bit longer than usual because banks are extremely busy, and because certain offices are closed in person (the IRS closed several offices, and appraisers can’t all get out to complete the appraisals as quickly as usual). Not all mortgages are so simple and easy to obtain. Jumbo loans are not easy to come by as several lenders have closed these programs.
• There are some potential long term issues with the federal buyback, so mortgages might be more difficult to obtain in coming days as buyers flock to get mortgages at such low rates. The way the securities buy back works in the background has had some unintended consequences and it is possible that lenders will tighten up their policies significantly in the future.

Is this another 2008 on the horizon for homes then?

All signs point to no. At the core of 2008 was overbuilding and predatory lending. Inventory was significantly higher in the 2008 housing crisis. Currently we don’t have enough. Charlotte (and NC in general) has tax advantages drawing business here, so our long term real estate economy is strong.

While interest rates are low, the practices are not predatory in the least like in 2008. Credit scores must be high to obtain a loan these days. Typically employment records are checked a week to ten days before closing. In this crisis, they are now checking three days in advance and the expectation is it could even be verified on the day of closing soon. All of this means that the market has not been artificially propped up and that the supply is still on the low side for all of the demand we have. With some of the recent uncertainty, however, it is possible we will see some of our rapidly appreciating prices slow down a bit.

What should I do if I am thinking about buying or selling?

This one is easy. Preparation is the key:

If you are buying:

1. Get financing ready today! This process is so easy, but for some reason people stall. Talk to a lender and get yourself “buyer ready.” Highlands Mortgage, (a partner we recommend at Helen Adams, though you can use any lender you are comfortable with) has a program where they can have everything ready to go for you and when you find that house you love, you are positioned very strongly, like a cash buyer. Don’t lose out on a house because a seller didn’t consider you a serious buyer because you didn’t have pre-approval.
2. Research! Call an agent and have them run Market Analyses of areas you like. Find out what properties sold for in the area recently. Know the market, know the streets, the parks, the commute, etc.
3. Find a buyer’s agent to advocate for you and help you navigate the process.
4. Sit down with your agent (virtual sit downs are also great) and discuss your needs and wants. Most importantly, make sure the agent understands your “whys.” This helps the agent to understand your requirements – and armed with this information, they can use their resources to help you. So many people skip this step and just want to see homes – but taking the time to do this can make your process much more efficient.
5. Understand the NC Real Estate Contract and how the buying process works. When you find the perfect house, again, you want to be ready to sign that contract. Reading it in a panic then adds stress that is unnecessary.
6. Get set up on a search so you can give your agent feedback.
7. In this Stay-at-home period, if a house comes on the market you love, you can still make an offer! Talk to your agent about the logistics of this. It is easier than you’d think and could be the perfect solution for your situation.
8. Be ready to go when the order is lifted. But, everyone else will be too, so we expect a flooded marketplace. This is why getting everything ready now is so important.

If you are selling:

1. Sit down with your agent (again, virtually works well here too). Get to know the process and the typical timing. Explain your goals, important dates, etc. Ask your agent his / her opinion about listing your home. Make sure your agent is an expert at marketing. This is extremely important in the virtual listings, but it will be incredibly important once the market “re-opens” and you want your home to stand out from the crowd of other listings.
2. Get your house parade ready – go through the home maintenance checklist, declutter and freshen everything up. The expectation is that once the order is lifted, lots of homes will be listed. You want your home to be perfect.
3. If you are ready before the order is lifted, inventory is incredibly low, it might be a good strategy to list now. People are buying sight unseen. You could list during this period and competition will be lower. Also, your agent can market your home much earlier without competition. Discuss this possibility.
4. Go through your home with Buyer’s Eyes – what will people see when they come through your home – address these things if they are issues, highlight them if they are advantages.
5. List!

While many feel so helpless in this strange time, this time is a great opportunity to prepare your home for sale, and also a great time to get your ducks in a row to be the strongest buyer possible.

Good luck, let me know how I can help and stay well!