Today we’re co-hosting a Real Estate Joe episode at WOA TV. We’re going to discuss the question everyone wants to ask Joe, how is the Corona Virus affecting real estate in Arizona? Joe talks about buyers and sellers and the challenges they face.
Cooper: Hi folks, I’m Cooper and welcome to the World of Arizona Studios. Today we’re co-hosting a Real Estate Joe episode at WOA TV. We’re going to discuss the question everyone wants to ask Joe. How is the coronavirus affecting real estate in Arizona? So tell us Joe in today’s current environment, how is it affecting buyers and sellers?
Joe: That’s a great question Cooper. Let’s talk about buyer’s first. You know, some of the things that I’ve been noticing and observing, as well as, the conversation with other Realtors throughout the valley, is we’re seeing buyers getting cold feet. So buyers that were in contract, we are seeing some cancellation because of the fears of the coronavirus, as well as, the impact it will or has had on the economy. Now, the other thing I’ve noticed is that on the higher price point homes, let’s say once you start talking about more like $750k, but more specifically in the million-dollar plus range, a lot of buyers are just packing up, they are putting their searches and their purchases completely on hold. And actually, we have some instances where we had folks that were right there at the closing table, cancel and walk away from their earnest deposit because of the fear of what’s transpiring in the marketplace. I’ve also noticed that there are plenty of buyers that are still proceeding forward. But that’s a little different because there’s some subtle nuances now. So, we are seeing a lot of buyers making offers sight unseen, or making offers purely based on like a virtual tour.
Cooper: So what do you project will happen with buyers and sellers who go into contract sight unseen via these virtual tours?
Joe: So here’s my thought, I think we’re going to see a higher rate of cancellation because most of these buyers have not physically been able to get into the home. They are only being able to come into the home once they’re in contract and only during their inspection period when the inspector is there. So, my instincts are telling me that in a week or two there will be some tangible data that will show a significant increase in cancellations.
Cooper: Okay, let’s switch to the sellers. What are you seeing the sellers doing in response to this COVID-19 outbreak?
Joe: So I’ve seen a couple of things that have transpired. First, I am seeing a lot of sellers actually take their homes off the market. We do have on our MLS something that’s called TOM, which is an acronym for “Temporary-Off-Market”. So, a lot of sellers are just not allowing folks to show their home. So, that’s just one way they’re just putting on the brakes. A lot of these sellers are practicing social distancing themselves. Which is another reason why we’re seeing a lot of sellers not allow folks to come through their homes. The other reason I’ve noticed and observed as well as too, you know, is sellers with children or grandchildren, their kids are at home. You know, the state has closed down all schools. So, those are three legitimate reasons why sellers are not allowing folks to show their homes currently. And Cooper, to add to that, that’s why we’re seeing a lot of buyers making offers sight unseen. Because sellers are still, they still do want to sell their homes. They just don’t want a ton of folks to be going through their homes. That’s why we’re seeing a lot of offers being made and accepted sight unseen. What is helping buyers make that decision is we are seeing a lot more virtual tours come up in the market. So you’re seeing a lot of Realtors take their phones and do a quick tour of the house and that’s how buyers are making their decision to make an offer or not.
Cooper: Okay, that makes total sense. Let’s shift over to new home construction. What are you seeing out there?
Joe: So this is what’s going on with new construction homes and what the new builders in town are doing. They have closed the model homes. So they’re no longer open to the public. They are making exceptions, so you can view model homes by appointment only. The other thing that builders are doing is they’re creating virtual tours. So what they’re doing is they’re making videos of their model homes and posting them online, so it helps buyers make that decision that they’re trying to make if that’s the right home for them or not. And in reality, most builders in town are doing both.
Cooper: Okay, is it the same for a spec homes and for those that don’t know what a spec home is, could you tell us what that means and is there any difference with them and these model homes that you’re talking about as far as the public being able to view them?
Joe: Right, so just for folks who don’t know, a spec home or speculative home is a home that the builder has already started construction on. Many times they’ve already made selections to that specific home. So, you don’t necessarily get to choose all the finishes that you would if you were to just select a lot and go ahead and start the process from the ground up. But the process is still the same. With those speculative homes or spec homes, it is by appointment only.
Cooper: Okay, Maricopa County has been one of the fastest-growing counties in the country by population, not percentage growth, in the past decade based on Census Data. How do you see this coronavirus affecting the real estate market for the remaining part of the year when we come out of this period of social distancing?
Joe: That’s a great question Cooper and it’s a really hard one to answer, but this is what I believe is going to occur. I think people are going to continue to purchase homes, especially in the lower and medium price points in the valley, and I do believe that’s just because we’ve had such a lack of inventory in this price point range. So when I talk about lower and median priced homes, I’m saying homes up to probably about half a million, five hundred thousand. That’s where I think I would differentiate and just draw that line. I do believe that the overall volume will be down and these are the reasons why I believe that’s going to be the case. So, our Valley, a big portion of that is made up with travel and tourism, right. We are a destination for a lot of folks. And we also have a very robust Aerospace related industry. Both play a large portion or play a large role in our overall local economy. Many of those folks in those industries have been dramatically affected. I also anticipate that a lot of these corporate related relocations where they relocate and transfer employees will be down dramatically. You know, at this point in time businesses are and will continue to reassess their organizational structures, as well as, readjust their forecast. So, that portion of the real estate business I do truly believe it’s going to take a massive drop in transaction and volumes. And last, I also imagine that if we are in a recession and I think that, you know, that will slow down the market some, as fear and concern will stop some folks from proceeding forward with their plans. On that topic, only time and data will tell if we truly will be or are in a recession once we have two successive quarters of negative GDP. So, Cooper I think just to summarize things, we are definitely in a time of transition, and a lot of folks are taking the wait-and-see approach. I’m definitely going to follow up again as we have more data that comes out in the upcoming weeks and months about how coronavirus and COVID-19 is truly affecting our real estate market. We’ll definitely have another update for the people out there.
Cooper: Okay, thanks a lot Joseph Yu. Once again, my name is Cooper and we’re here at the World of Arizona Studios co-hosting an episode of Real Estate Joe at WOA TV. You guys can find more episodes just go to WorldofArizona.com and click on WOA TV and select his program. We’re going to continue to release more of these remote guest hosted episodes, our attempt at practicing our social distancing and just to keep you guys caught up on what’s going on here in the Phoenix Valley. Everyday things change, certainly week by week there will be quite a bit to talk about and analyze the data as it changes and we’ll be sure to keep bringing you episodes. It helps if you go on our YouTube channel and hit the Subscribe button, hit the little bell so it notifies you, it’s an easy way to get notified of new episodes or just go back and check routinely. Like I said, it’ll be, certainly weekly, possibly more often than that if big changes happen in the market we’ll ensure to get Joe back here and talk about the changes that have happened.
Joe: I look forward to it, thanks Cooper.