Thoughts on COVID-19 and Charlottesville's Real Estate Market

“Any opinion on how you think all that is going on with this virus will affect the market would be appreciated.”

I don’t know. But we’re going to be ok, eventually.

First, though.

SupportCville.com – an active resource of ways locals can help and get help.

The Coronavirus will affect our market, but it’s too early in the crisis to know exactly how.

I’m used to knowing most of the answers my clients ask. Right now, I’m saying “I don’t know” more often than usual, and I’m answering questions no one has ever previously conceived.

Questions about whether sellers are showing their houses anymore, whether moving companies will be in business in a month, if attorneys and courts are open, how are buyers going to get wires if the bank’s main office is closed?

News changes daily, hourly, minute by minute. As I was writing this, I talked to a lender who recounted how she’d lost two appraisers who were self-isolating after getting tested for COVID-19, and we talked about how some sellers are not letting appraisers in houses. I’ll stop there, as whatever I type next will be out of date before I finish typing.

And yet, buyers are writing contracts on houses. Sellers want to sell. Attorneys are doing closings. Lenders are lending. The Charlottesville real estate market is moving, albeit cautiously and slower than we are accustomed to. And that’s ok.

What’s the market going to do though?

Right now (~4pm 24 March)

Between 1 March and 23 March 2019, in Albemarle + Charlottesville, per MLS, 219 houses went under contract (some of those likely didn’t make it through closing for home inspection, financing, etc, but let’s go with 219 for now).
Between 1 March and 23 March 2020, in Albemarle + Charlottesville, per MLS, 218 houses went under contract.

Those numbers hide our reality.

On 3/14 – 18 contracts were ratified in 2019; 3 in 2020.
3/14 – 3/23 – 116 contracts were ratified in 2019; 83 in 2020 – down 28%

National data, courtesy of ShowingTime (Charlottesville data is not in this dataset, but it's a useful trend line) — National data, courtesy of ShowingTime (Charlottesville data is not in this dataset, but it’s a useful trend line)

We will be ok

Not right away, but whenever this thing is under control, the Charlottesville – Albemarle economy will hopefully be ok. We have good employers – UVA, State Farm, NGIC/DIA, the tech sector, CFA Institute.

I was talking to a friend and colleague today about this. I think, once we get through this, that the real estate sector of Charlottesville’s market will come back. Our Spring 2020 season is likely to be pushed to Spring 2021.

February to April is the time when renters have to choose whether to renew their leases (think: 60-90 day renewal notice, leases start in June/July). So, we’ve lost those buyers for now.

Reading the Zillow report is somewhat reassuring.

“While official data are still not yet ready for January or February 2020, unofficial data reported by Brown (2020) at Marketwatch indicate that Chinese house prices remained stable from December to January (+0.27%) although the volume of transactions has fallen by 90 to 98% from normal. This episode illustrates a particularly strong “wait and see” pattern similar to what happened during the SARS outbreak–customers are not going to walk-throughs or closing on transactions in person. Data in upcoming weeks will tell us how long this outbreak lasts in China.

Additionally, a report by Hatzius et al. (2020) at Goldman Sachs shows detailed activity data from China during the current episode. The Hatzius report corroborates the Brown report–property transactions and transportation have nearly ceased due to avoidance behavior (some of it driven by a public policy response) while the consumption of coal fell by only 30% year over year, since people still need to heat their homes.”

To paraphrase a friend who wrote recently, when we see the light at the end of the tunnel, the light will be the end, not the train (no longer available).This isn’t one of my favorite posts that I have written, as we are in the early days of this crisis. I wrote it to answer clients’ questions, and to put my thoughts here so I can look back in a few years.Update. This is a good post, Economic Slowdown: What the Experts Are Saying