We like to think that the real estate market is very rational, based on need and desire, practical and coherent. Time and time again, we learn that it just isn’t true. It happens on both a micro and macro level, a transactional level and across the market: Decisions are made based on the new realities buyers and sellers perceive.
Q: How has the COVID-19 pandemic changed the real estate market?
A: It has changed it in a couple of ways. Transactionally, it is much harder to see houses for sale, so as open houses and broker tours have gone away, only truly interested buyers will actually put out the effort and fill out the paperwork required to visit a house for sale. There are now COVID addendums included in many purchase contracts that give buyers and sellers additional rights that they might not have had before.
On a macro level, buyer demand has swung quickly toward single-family homes, away from the big cities and away from more densely populated options such as condos and townhomes. Buyers are looking for space, especially outdoor space that is perceived as being healthier.
Q: What are buyers looking for in a home now?
A: An extra room. Some are calling it a “Zoom Room” – a place where either a parent or a student or whoever could set up a conference call or study session. Because many people no longer “go to work,” they are spending lots more time at home. They are also looking for more of a yard so that if they can’t get out of the house to go to work, at least they have extra space to go enjoy.
Q: I hear that people are moving out of the cities. Is this true?
A: Yes. Traditional second-home locations such as Santa Cruz, Lake Tahoe and the Gold Country are seeing very strong demand and price appreciation. Less-expensive areas that are
still considered part of the Bay Area are seeing huge demand spikes – think: Walnut Creek, Petaluma, Livermore and Brentwood. Out-of-state areas such as Boise, Ashland/Medford, Colorado Springs, Palm Springs, Las Vegas and Bozeman are very busy with buyers who have realized that they don’t physically need to be in Silicon Valley to work here. (But note that some
companies that allow their employees to work remotely are adjusting salaries downward based on salary ranges of the cities their workers are moving to.)
Q: Does that mean that prices will go down here?
A: Probably not. The main issue is that there are still more people who want to live here than there are people willing to leave – that is, there are fewer sellers.