It’s been exactly one month since Governor Sisolak issued a Declaration of Emergency in response to the pandemic sweeping our globe. Every day brings exponential change, leaving many Las Vegans wondering if life will ever quite be the same. As we learn how to live in this new world, standing on red boxes in the grocery store line, donning our masks, it’s apparent that tensions are rising and nervousness is the new norm.
As Realtors and consumers struggle to balance essential housing needs and preserve the safety of their asset for the sake of the people living in it, all indicators point to trouble on the horizon.
As the SBA comes to terms with executing the $350 billion forgivable loan program designed to ensure that small businesses do not lay off employees, we have to wonder if the typical small business owner, defined as 500 employees or less, will be able to hang on. It should come as no surprise that an organization equipped to handle an average of $30 billion in loans per annum is fraught with pitfalls and ambiguity as it attempts to execute a monumental legislation that was passed just two short weeks ago. While it may take many months to fully understand the true impact of this on business and the economy, what is becoming very clear is that the SBA lacks the gunpowder to fire this massive and much needed bullet.
For the first time in United States history, gig workers will be eligible for limited unemployment benefits. This could be a major shot in the arm for jobless independent contractors, provided by the long-awaited implementation of the CARES Act. After much delay, the Department of Labor finally issued its guidance to states over the weekend on the financial, operating and reporting instructions for unemployment divisions, so that workers could begin getting their federally funded $600 per week relief.
As the city idles on pause, confusing headlines continue to make their way into the mainstream. On April 7th, the Las Vegas Sun Reported, “Las Vegas Home Prices Hit Record Despite Coronavirus.” While that could paint a picture of a market in an upswing and impervious to the current economic backlash, it’s important to bear in mind that those March records (closes) are a direct reflection of consumer confidence in January and February. We could not be more fortunate to have entered this pandemic on such a strong housing foundation, and the March numbers prove just that.
However, it’s clear to see the ramifications that the shutdown is having already. A Las Vegas Review Journal headline three days later read, “Home Listings Tumble in Las Vegas, US Amid Coronavirus Crisis.” As Realtors and consumers struggle to balance essential housing needs and preserve the safety of their asset for the sake of the people living in it, all indicators point to trouble on the horizon.
Because not all borrowers will be so fortunate, we can expect to see higher default rates six months to a year from now, along with many more homes on the market.
Though spring is usually prime home shopping season, sellers are reluctant to put their homes on the market this year. Housing numbers are skewed due to physical and economic limitations of the pandemic, which we can glean from a few thought-provoking stats. New home listings were down 27% from a year ago in the first week of April. Despite the downturn in new listings, twice as many houses were listed (between new listings and those that fell out of escrow and went back into inventory) than were sold. Escrow cancellations were up 94% in the month of March, compared to one year ago. This is obviously a direct result of massive job losses and a disruption to business as usual. A surprising 560 homes went under contract, which appears to be a healthy number, given the circumstances. This could be partially attributed to all time low interest rates and affordable payments. Roughly 16% of all listings currently in the MLS reduced their asking price, while another 10% withdrew their listings. It’s clear that a lot of would-be sellers are taking a “wait and see” position. So what in the world does all this mean? Only time will tell. There are a million moving parts and pieces balancing in the wind and they will continue to unfold over the months and years to come, thus shaping our housing market.
Homeowners continue to take advantage of mortgage payment deferments while waiting out the storm. The intent of the deferment is a literal timeout until borrowers can get their finances back in order with the support of unemployment, stimulus funds and possible re-employment. By the time they would be able to catch up on all of the back payments, they would, in theory, be in a fruitful position to carry on with their loan payments as usual. Because not all borrowers will be so fortunate, we can expect to see higher default rates six months to a year from now, along with many more homes on the market.
Just as the convenience of iBuyers was gaining appeal among sellers, the “ZOO” of institutional buyers, Zillow, Open Door and Offerpad, have put home buying operations on pause. In a recent article published by CNN Business, Zillow Group CEO and Co-Founder Rich Barton stated, “Our top priority is ensuring the safety and health of our employees, customers, and partners. Given the concerns for public safety and rapid developments by governments that restrict local real estate activities, we determined it was prudent to pause our home buying to preserve our capital. We plan to restore Zillow Offers’ full operations once health concerns pass and local health orders are lifted. In the meantime, we are working to support our customers and partners in these uncertain times when home has never been more important.” Despite putting a pause on iBuying, Zillow said it will continue to market and sell homes via Zillow Offers, but will temporarily suspend its plans to open additional Zillow Offers markets. Without the no-fuss option of selling to the “ZOO,” those sellers strapped for time will be forced into traditional sale methods.
The world is different today and change is raging upon us on all fronts. Spring has sprung in the city and the sun has finally broken through the clouds. Las Vegans are taking advantage of one of the few times we ever get to open our doors and windows and let in the fragrant smell of the blooming desert. Patience is still of the highest order, as we have a ways to go before lockdown is over. Hopefully the promise of spring and all that comes with it is enough to get us through another week. Be well and stay safe, Las Vegas. We’re all in this together and we are #vegasstronger.
Working for me is the fact that I’m going to keep my finger on the pulse of everything that’s going on. We have Las Vegas Real Estate EXP meetings every single day to deliver this information to the team so that they’re well informed and by working for me you’ve got a leader who’s disseminating information. What’s going on in this world and what actually makes the economy go hum. Understanding this and then disseminating that information to our team, so they see the big picture too and so that they can go out and focus on the right thing, make smart deals and make more money
PAM JUNGE
