I am getting a lot of very concerned calls and emails from clients who want to know how the Corona virus will affect Real Estate and current transactions. Let me address this now.
The title companies are open during this 3 week, shelter in place, order since Title companies are considered essential. However at this point the Alameda county recorder's office is not. Santa Clara county does do E-recording so therefore if you have an escrow closing in Santa Clara, then you should be fine. The Fremont title companies are working to get the county of Alameda to do limited recordings so that we can close current escrows. I will keep you informed.
Knock on wood, we have had no buyers walk away from their escrows today or yesterday or this past week. Fingers crossed.
I have offers due on two homes today and believe it or not, I am still getting offers on both. I just received an offer 110k over asking on one Irvington home this morning. This is great news since we are all thinking the worst.
Homes being prepped for market:
Contractors are exempt from the shelter in place order. Therefore if we are currently preparing your home for market, then we will do our best to continue. The problem however is that the suppliers may not be open for business. I will keep each of you, updated on your home.
NOW what everyone is really concerned about. Will the Real Estate market crash during this time? The answer is a big NO. Please let me explain.
The stock market can crash in a day. A particular stock can crash in an hour. The Real Estate market does not crash like this and here is why. Real estate ticks down only. This ticking down occurs when the market slows, and a seller who either needs to sell,or has a lot of equity is willing to reduce the price of their home. Typically a seller will sit on a home price for 30 to 45 days prior to making any price reduction, and that price reduction will be around 1% to 3%. If the home does not sell at that point then the seller will do another reduction of 1% to 3%, however this is typically 60 days in. What does this mean to you? This means that home prices may tick down, and probably will tick down over the next few months, however this tick down of the Real Estate market will not be more than 5% over the life of the virus. Do not panic. We will be just fine since everyone receiving this email has a lot more than 5% equity in their home.
To demonstrate what I am speaking of, we need to look at history. First, we did get a market crash in 2007, however the market did not crash overnight. The market ticked down over a 7 year period before it recovered. Second; The stock market crash did not cause the Real Estate crash of 2007 but just the opposite. The Real Estate boom ending, caused the stock market to crash. Please remember what I have said in this forum many times. Real Estate can only crash when buyers put zero money down and have nothing invested in the home and are willing to walk away, which happened in 1989 and 2006. Over the past 8 years, we have had the most qualified buyers in history buying homes. Min of 20% down. Excellent credit and high incomes. These homeowners are not going to walk away from their home if it comes down 5%, they just won't. Would you? No, of course you would not. You have 20 to 50% equity in your home and you just are not going to walk away because it comes down 5%.
This Coronavirus is more like 9/11. For one month after 9/11 happened only one home in Fremont sold. I remember it well because it was my listing. The bottom line is that the market did not crash. The market took a breath and went back to normal a month after the attack. Or you can look at the dot com crash of 1995. The stock market crashed huge in 1995 but believe it or not, the Real Estate market did not. If you recall, we got a lot of new agents during that time who were engineers that could not find a job in engineering.
The bottom line is that Real Estate will not crash during this time. It will tick down but no more than 5 to 8%. Please relax at home and take some time with your family knowing that your equity is safe.
Feel free to reach out to me if you have any questions or if I am not clear on this.