REAL ESTATE SPOTLIGHT
By Gary A. Miller
The old saying, “may you live in interesting times,” would probably ring true if you have been in the market to buy or sell a home in southern Orange County in 2020. With the impact of COVID-19, low housing inventory and the dramatic drop in interest rates, the housing market of 2020 so far has been a wild ride.
COVID-19 has certainly provided challenges for us all, both professional and personally. “I don’t think anyone knew how the housing market would react to COVID-19 back in March when the stay-at-home orders were issued,” noted Kyle Williams, broker-in-charge at Flex Realty. “But the last few months have shown us all how important having a safe space to shelter is.”
Initially, Orange County leadership appropriately restricted real estate showings to emergency situations only. This led to a slower listing market in March and April, with activity beginning to open back up in May, June and July.
When we look at the entirety of the housing market in Orange County in the second quarter of 2020 was down, with closed sales coming in approximately 20 percent lower than in 2019.
However, the impact of the virus and accompanying stay-at-home order on recent closed sales in southern Orange County for the year-to-date has been relatively small, with the most dramatic changes showing up in May and June. This is illustrated in the table below, which compares the first seven months in 2020 to those same months in 2019.
For our purposes, southern Orange County is defined by zip codes of 27510, 27514, 27516, 27517 and 27707 within the county boundaries.
|January 2019: 48 closed sales||January 2020: 44 closed sales|
|February 2019: 53 closed sales||February 2020: 48 closed sales|
|March 2019: 69 closed sales||March 2020: 60 closed sales|
|April 2019: 88 closed sales||April 2020: 89 closed sales|
|May 2019: 122 closed sales||May 2020: 70 closed sales|
|June 2019: 137 closed sales||June 2020: 113 closed sales|
|July 2019: 104 closed sales||July 2020: 99 closed sales|
There is a natural lag between a time of reduction in listings/showings and a corresponding drop in closed sales, as it most often takes 30 or more days to completely close a transaction. So, homes with closed sales in May would have most likely first been listed in March and April when stricter stay-at-home orders were place.
It appears the market rebounded somewhat quickly to being relatively comparable to the prior year in closed sales. Looking at July in the table above, we can see that the closed sales for 2020 were only slightly behind 2019. Additionally, median days on market from January through March was 25, whereas it was only 10 days for April through June.
This points us to the next important factor in the housing market in 2020: low inventory.
The second quarter of 2020 saw approximately 17 percent reduction in available homes for sale from 2019 and an even greater 25 percent reduction in available homes compared to 2018. It is natural, then, that fewer closings would take place, since there were simply fewer homes to be purchased.
Low inventory has a tendency, due to supply and demand economics, to drive competition and push prices up. Thus, sellers are typically receiving more and higher offers, and buyers are having to bid more frequently and with higher offers. In many cases, buyers are also making more concessions to help get their offers selected — especially with the size of due diligence payments.
All of this sounds quite a bit like a “seller’s market,” right? But, wait! We should also consider the historically low interest rates that have been available during all of this. With the national average on home loan rates dipping below three percent for a 30-year mortgage for the first time, buyers have more buying power than ever. So, while supply and demand factors currently tilt in favor of sellers, the relative affordability of loans certainly tilts in favor of buyers.
As emphasized by Williams, “The lack of housing supply, especially affordable housing, and record low interest rates have fueled the recovery, although our thoughts naturally turn to what the long-term impact will be.”
Indeed, it will be interesting to monitor market changes in the coming months and beyond.
Gary A. Miller is co-owner of Red Bloom Realty. He has lived and worked in Chapel Hill off and on since 1994 and is an avid kayaker, traveler and former educator. His real estate column will appear monthly in The Local Reporter.