Coronavirus Forces Culture Change in Real Estate
As new restrictions on American life, including extensive closures of schools, restaurants, and bars in cities across the country, exacerbate the efforts surrounding the prevention of the spread of the coronavirus, real estate brokerages are adapting their businesses and preparing their clients for what could be a chaotic few weeks or months ahead in the housing market.
Some companies are instituting policies against holding open houses for the time being while others are sticking to business as usual but with extra precautions, such as adding sanitation stations to listed properties. The federal government has taken recent action to shore up the economy against the threat of the virus, with the Federal Reserve cutting its benchmark interest rate to zero. Such moves have helped push mortgage rates to record lows, but while that seems enticing for more prospective home buyers to enter the market, escalating efforts to encourage Americans to self-quarantine could stop those would-be buyers in their tracks.
The number of confirmed cases of coronavirus in the U.S. has climbed above 6,519, and as of Wednesday morning, there have been at least 115 deaths domestically. Last week, the World Health Organization declared COVID-19 a global pandemic. The U.S. has declared a national emergency. America has “not reached our peak” of coronavirus cases, says Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases. In an interview with CNN, Fauci warned that life in the U.S. likely would change dramatically while the country fights the virus.
How Much Has Business Been Affected?
Potential buyers thus far have appeared resilient in the face of panic. ShowingTime, which collects data on the nearly 1 million showings scheduled through its system nationwide each week, has begun tracking the potential impact of coronavirus on home tours. “Looking at the data so far this year, we have not yet seen a significant drop in national buyer activity,” ShowingTime reports. “There may be future effects of COVID-19, so the situation will be monitored closely. At this time, it seems most buyers and sellers do not regard seeing a few individual homes with their agent as a significant risk.”
Impact on Commercial Market
- The hospitality sector has been hit hard as cities place limits on gatherings of 50 or more people, which has led to canceled conferences. (NAR has announced it will decide by April 1 whether to hold its REALTORS® Legislative Meetings & Trade Expo in Washington, D.C., in May.)
- Americans are canceling vacations as the U.S. limits international travel and shuts down its borders to try to stop the rapid spread of the virus.
- Aside from grocery stores and pharmacies, the retail sector likely also will see a decrease in shoppers in the short term, which could limit profits and delay expansion plans, according to a report from Marcus & Millichap.
Indeed, only 16% of REALTORS® nationwide report reduced buyer interest in their markets since the coronavirus scare began in the U.S. in January, according to a National Association of REALTORS® survey released last week. However, the effects of the virus can vary from market to market, and some real estate professionals report a more pronounced impact on their business. Matt Dolan, a sales associate with Sagan Harborside Sotheby’s International Realty in Marblehead, Mass., told REALTOR® Magazine that he’s seen a scourge of sales contract cancellations in the last week. “People had to go back to step one and think about their basic living needs like, ‘I have to get some toilet paper’ or ‘My kids are out of school; what am I going to do with them?’” Dolan says. “They don’t have time to think about a move.”
Such threats are looming as the real estate industry readies for the traditionally busy spring selling season. NAR Chief Economist Lawrence Yun has predicted that seasonal home sales could tumble about 10% due to coronavirus fears.
NAR has an updated coronavirus guide for REALTORS® that offers advice to real estate pros for safeguarding their business and themselves while interacting with clients. Among the suggestions are to consider alternative marketing strategies for sellers, such as online virtual tours, and reminders to obey the Fair Housing Act when addressing coronavirus concerns and working with clients. For example, it’s fine to ask a client about his or her recent travel, but be sure to ask all clients the same question to avoid the appearance of discrimination.
Dolan is going a step further, mulling measures to shore up finances for his business. Seeing inquiries on their website drop significantly recently, Dolan and his team are considering cutting back on marketing expenditures to remain solvent in case of a larger economic downturn. As layoffs begin at companies nationwide due to coronavirus complications, further impacts on his business appear inevitable. “Unfortunately, as brokers, we don’t fall in that ‘unemployed’ category,” he says. “I don’t have the ability to say, ‘Hey, I feel sick and can’t show up to work. But still pay me.’”
“No one’s shaking hands these days,” David Kong, director of relocation and partner with the LevinKong Team at Keller Williams NYC, told Forbes.com. “They’re doing the elbow bump.” Kong says he canceled one of his open houses at the seller’s request because the seller has two children with health issues and was concerned about too many people entering the home. Kong is ordering a 3D walkthrough to give prospective buyers an opportunity to check out the unit from a smartphone or computer instead.
In a blog post last week, Redfin CEO Glenn Kelman announced that the brokerage’s pushbutton tool on its website would be turned from a private in-person tour request to a request for an agent to conduct a tour virtually via video chat. “Our customers can also complete every part of a contract virtually,” Kelman said. “In the states where the law allows it, customers who use our mortgage and title service can close electronically. If you’d rather not meet others except where necessary, we can let you see a home, bid on it, and close on it—all virtually.”
About a quarter of REALTORS® surveyed by NAR say their sellers are taking extra precautions, including canceling open houses, requiring buyers to wash their hands or use hand sanitizer, or asking buyers to remove shoes and wear footies during showings. A CRE survey of corporate real estate professionals, who manage property assets for large corporations, shows pros are taking extra precautions, including:
- Increased access to hand sanitizers (92%).
- Implementing travel restrictions (88%).
- Enhancing building cleaning, janitorial, and sanitation efforts (85%).
- Expanding use of virtual meetings versus face-to-face meetings (76%)
- Postponing or canceling business meetings (69%).
Real estate pros also are trying to develop a business continuity plan in case the coronavirus outbreak worsens in the U.S. The Centers for Disease Control and Prevention’s Business Pandemic Influenza Planning Checklist offers tips on specific activities that businesses can do to prepare for an outbreak.
Some brokerages are distributing resources for clients as well. For example, homeowners who are facing financial hardship due to the effects of coronavirus should contact lenders about forbearance options. Fannie Mae, Freddie Mac, and the Federal Housing Administration have announced mortgage payment assistance to those impacted by the virus. “Do not panic, stay informed, and use your best judgment,” NAR’s guidance reads. “The situation is rapidly changing, so focus on putting policies and procedures in place to avoid business disruption in the event the situation worsens.”