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Real Estate Market Update for Mar 2020 | Kirk Pugh, Broker Realter

Thursday, March 19, 2020   /   by Anne Rose

Real Estate Market Update for Mar 2020 | Kirk Pugh, Broker Realter

On Covid 19, your 401K, toilet paper shortages, and the real estate market. Some sanity from Kirk Pugh, Broker Realtor, at KBT Realty Group.

Let's add some insight into the question we get almost a hundred times a day now, "What is going to happen to the real estate market in light of the COVID-19 virus and in light of the tumultuous state of the stock market right now?"

On COVID-19 and the Real Estate Market

What's going to happen? The honest answer is, "We don't know."

In the six years prior to the real estate market crash in 2008, the average home price appreciation for each of the six years was somewhere in the 17-20% range. So, there was a huge appreciation in home values, leading to a great big bubble, that burst when the financial markets crashed in 2008.

In the six years prior to today, average appreciation on homes has been running in the 4-6% range, creating no where near the bubble and the overpricing that we saw back in 2006 and 2007.

On that front, I am very confident with where the market is. We don't have a bubble. I don't feel like we are going to have a crash.

I will say that we are also - nationally speaking - in very much short supply of homes, particularly under $350,000 price point. The building industry all but halted during the great recession.

Since the recovery began in late 2011, early 2012, builders across the country have been trying to catch up and the last statistic I read was that we are still somewhere in the neighborhood of 4-5 million homes behind where the demand has been given the rise in population -- particularly in the number of people who are retiring to the Wilmington North Carolina area.

We have near historic interest rates. Rates are up a bit this week, and they've been a little volatile: last week I saw people lock in at 2.75 percent on 15-year fixed rate mortgages. This week, those rates are up even for the 30-year rates, while the financial markets try to get calmed down.

We feel like once the markets settle a bit and we get through the worst of the COVID-19 stuff, we will see rates come back down closer to 3% and maybe even sub-3% on shorter term mortgage product.

On the Financial Markets

I saw earlier that oil was down somewhere around $25 a barrel. There was a headline that said, "Oil Could Go Below Zero Dollars."

I'm not sure how that helps, if it goes to below zero, I guess that means they are paying me to take the oil and refine it.

The situation with Russia and the glut of supply combined with the greatly reduced demand in the United States is driving prices down, which is great for us at the gas pump, but if we got no where to go, cheap gas doesn't help us much!

So what Happens to the Real Estate Market?

The financial markets, in my opinion, may have an impact on our second home and investment home market here in Wilmington. It may have an impact on the volume of people who are retiring here. It may have an impact on people who are planning to retire who are now looking at their 401Ks, pensions, and their IRAs, and they are seeing they've lost 30% in the last 30 days, and maybe now they will work a couple more years.

Everyone that I talk to seems to think that this financial crisis is getting double-whammied by both the oil market and the financial markets, and the COVID-19 virus.

Many seem to think that it will pass relatively quickly, and that the housing market - because of extremely high demand and extremely short supply inventory and extremely low interest rates - the housing market is not going to suffer nearly as greatly as it did in 2008.

It should come back relatively quickly once we get past some of this stuff.

I just don't see us going into a depreciating or recessionary-type real estate market. Will it decelerate some? Yes, maybe, and that's probably a great thing. The pace at which things are selling will be reduced slightly, and everybody can kind of catch their breath, and we expect that right now.

We don't know if the United States will see an increase in the number of virus cases throughout the country - we kind of think we will. This "social distancing" thing is probably going to slow the growth curve of the virus, but it will likely extend the length of time that we are dealing with it because the number of cases are growing as quickly, so they can't fall as quickly.

The Take-Away

All-in-all, don't panic. Don't watch your IRA account on the screen 24-hours a day because it will make you sick.

You haven't lost anything until you sell something, right?

Same goes with real estate. People are still buying. People are still selling.

If you are fearful of someone walking through your house and leaving behind a germ, then I would say, let's wait. Do what's right for you and your family.

If you need to buy - and there are those people that need to buy now - then I would say, come on, let's go. And if you are scared, as a buyer, of walking around with me or one of our agents, and going through somebody else's house, we have ways that we can do that virtually with you. Particularly if you have a severe need to buy, like you're being transferred here in three weeks and you have to have a place to live. We can take virtual tours, we can do FaceTime tours of homes with you - we can use the technology that we have to help mitigate any type of risk you might feel from being out and about.

Just Wondering

I still don't get the egg shortage. Still don't get the run on ground beef. Really don't get the toilet paper thing. But whatever makes you feel good during the day.

Be respectful of the situation. Be mindful of your neighbors. There are those people that need help - we are here to help.

If you are in a high risk category, or you are immune-compromised, or you are over the age of 60, and we can run to the grocery store for you and try to find you a roll of toilet paper and a pound of ground beef, we are happy to do that. Just give us a call - my direct cell is 910.622.3478.

Stay informed. Don't glue yourself to the news all day, it'll drive you nuts.

We will get past this. Wilmington North Carolina is still a destination. Property values are not falling.

Let me give you one last example: March 1 - March 18 of last year, the market had either put under contract or closed 18 homes in the Cape Fear region of New Hanover County. So far in this year, March 1 - March 18, there have been 232 homes either put under contract or sold.

We are well ahead of our last year's pace. We are still showing property. We are still listing property. Everything is going to be just fine.

Be respectful of the situation. Be respectful of your neighbors. Don't panic, and carry on.


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