Is it a Seller's Market or a Buyer's Market in Real Estate? Muma College of Business Faculty, Supporters in the Business Give Advice
By Keith Morelli
TAMPA (August 13, 2020) -- A scarcity of available houses, low interest rates and newly developed virtual ways to tour and purchase homes are among the reasons the real estate market has withstood the onslaught of the COVID-19 crisis over the past few months, according to faculty at the Muma College of Business and outside real estate professionals. They say the trend likely will continue well after the pandemic subsides.
As COVID-19 continues to make itself at home in the United States, most of the residential real estate market remains robust, according to Nina Schmidt, a finance instructor at USF’s Muma College of Business who specializes in real estate, and Bob Glaser, a college donor and supporter who runs a successful real estate firm in St. Petersburg.
“Times are quite interesting for the real estate market,” said Schmidt, a member of the Kate Tiedemann School of Business and Finance faculty, who has been involved in real estate sales for more than 25 years. She cited reports showing a 5 percent home value increase in the United States from this time last year.
“This indicates that the real estate market has been quite strong overall so far, despite COVID-19,” she said, “but is expected to weaken moderately in the coming year.”
Locally, though, the market is bucking the national trend.
“In Pinellas, Hillsborough and Sarasota counties,” she said, “real estate values have been very strong, outperforming average U.S. values over the last year.
“When the economy shut down in March, showings and sales decreased, especially for condo buildings,” she said. “Condo buildings essentially shut down access for all non-residents, making showings virtually impossible and that seemed to have caused pent up demand.”
Predictably, many showings now take place in a virtual format, with virtual tours gaining in popularity. With an increase in showings, pending and closed sales have also increased, she said.
“Even the real estate closing process has now moved to a more virtual format,” said Schmidt, whose research interests beyond real estate include corporate finance, financial fraud, finance education and investments. She also is a Florida licensed real estate broker. The technological innovations related to the home buying process have accelerated over the past few months, she said. These improvements have made home buying more efficient and appear to be here to stay.
“Another trend is that mortgage delinquency rates have been going up for the last two months. The geographic areas that see the highest increase in delinquencies are also the areas that are most impacted by COVID-19.”
More than 75 percent of U.S. metro areas experienced an increase in serious delinquency rates in May 2020 from a year earlier, according to data.
“Another important observation is that inventories have significantly dropped,” she said. In Pinellas County, for example, the single-family home inventory has dropped by 40 percent in June of 2020 from a year earlier. In some cases, high-end properties that were on the market for years, suddenly sold after the initial shut down was over. Days on market are going down as well. This means that we have moved to an even stronger seller’s market. This might not be surprising, as many people are fleeing from urban areas to Florida’s desirable outdoor lifestyle.”
What does the future hold?
“My guess is that in many cases, COVID-19 will change how people live and work,” she said. “Home offices and remote meetings are likely to stay to a certain degree as they are more efficient and convenient. I see a continued trend of migration from urban areas to desirable lifestyle areas, even after the COVID threat subsides. As long as interest rates stay low, residential real estate markets in general will stay strong. Inventory will likely stay low and demand for new constructions will stay high, especially in our local area.”
“In past epidemics, such as the influenza in 1918, SARS in 2003 and H1N1 in 2009/2010, economic activity fell sharply but recovered quickly after the epidemics were over,” she said. “While the impact of COVID-19 on the economy may be more severe than the impact from those crises, I still believe that the residential real estate market will rebound quickly, especially in desirable lifestyle areas.”
What is the best advice for sellers right now?
“Since we are in a seller’s market, sellers are in an excellent position,” Schmidt said. “If you need to sell, you have a good chance of obtaining your property’s market value.”
What is the best advice for buyers right now?
“Now is a good time to buy. But you better be ready to make a quick decision. Properties are generally selling fast, as both days on market and month’s supply of inventory are going down,” she said. “I am hearing that in some of the hottest real estate markets, full-price offers are being rejected. Unless you make an offer above listing price, you may be out of luck.”
Additionally, she said, with the government adding trillions of dollars to the national debt for economic rescue packages and creating dollars from scratch at an unprecedented rate, inflationary pressures may come more and more into the picture.
“Real estate,” she said, “is a good hedge against inflation.”
Bob Glaser is president and CEO of Smith & Associates Real Estate. He also is a USF donor and serves on the Kate Tiedemann School of Business and Finance Dean’s Advisory Board in St. Petersburg
“The residential market has been outpacing any prior years in the months of June, July and August both locally and nationally,” he said. “The pandemic brought as expected a 60-day slow down during the spring season, cutting the business by 40 to 60 percent in most markets.”
He said real estate firms quickly turned to innovation to keep pace, introducing a number of virtual tools and providing protocol for safe showings.
He agreed that the market now is a seller’s market due to low inventory combined with record low interest rates.
“We found that the luxury range was prolific with consumers more motivated than ever to find their dream homes,” he said. “We had record sales.”