Is The Boom Over? After a decade of real estate growth, a shaky start to 2020
But $1,026,722,416 was the 2019 dollar volume of homes sold in the five-county area, up from $392 million in 2011. That staggering sales figure serves as a sort of “period” at the end of a decade-long real estate boom throughout northern Michigan, when listings, sales, and sale prices all rose sharply.
In these uncertain times, however, the COVID-19 outbreak has the potential to alter that streak. In early March, Dr. Lawrence Yun, chief economist and senior vice president of research for the National Association of Realtors, said a survey among Realtors showed reductions in both buyer and seller traffic. Additionally, the stock market’s volatility is increasing economic anxieties.
“The coronavirus is leading to fewer home buyers searching in the marketplace, as well as some listings being delayed,” he said. “Given that a home transaction is a major commitment, the uncertainties on how the economy will play out and the spread of the virus itself are barriers to home-buying and selling.”
He noted that the mid-March stock market crash increased economic anxiety, but low interest rates may help to keep the industry solvent, though likely not as strong as it would have been otherwise.
“It is too early to assess the likely impact as to whether lower interest rates can overcome the economic and health anxieties,” he said. “But (a recent) survey is implying in the short-term at least that home sales will be chopped by around 10%, compared to what would have been the case.”
The mood of area Realtors might be described as somewhere between “wait and see” and “guardedly optimistic.” Meagan Luce of Century 21 Northland is a 14-year veteran of the local market and was a real estate investor for many years before that, so she’s seen the up-and-down nature of the market from close up.
She’s familiar with the cyclical nature of real estate, and said she already anticipated the real estate market beginning slow, though remaining fairly strong. The caveat is the pandemic. “Since 2012 it’s been appreciating,” she said. “As long as the coronavirus doesn’t push us into a recession I think it’s a strong real estate market.”
That includes the construction industry, which was decimated by the recession, bleeding skilled workers out of the area. It’s been a Herculean task to catch up with rising demand with fewer skilled trades workers, but Luce believes that may no longer be the case. “I think we’re finally catching up,” she said. “We’re not where we should be, but it’s better with new builds.”
Kimberly Bork of Venture Properties said she saw the year shaping up to be outstanding before things were impacted by the coronavirus. She works with a lot of waterfront properties, and typically doesn’t bring them on the market until spring. This year they were selling by March. “The economy has been great, interest rates low. Now all bets are off,” she said. “Plus it’s an election year – but it was an election year four years ago and it was fine.”
“I think things will come back,” asserted Bork. “There are still buyers who have sold and now need a home. Interest rates are low. Real estate is still a safe place to invest.”
Matt Dakoske of RE/MAX Bayshore Properties in Traverse City said it remains to be seen how the real estate market reacts. With virtual tours, email, online meetings and other uses of technology, most facets of the real estate industry can continue. But title work to finalize sales may be a stumbling block: “I put a house on the market and had it under contract,” he said. “Now can we get it closed?”
He said when things return to some semblance of normal, buyers will still want to buy and sellers will still want to sell. “The pent-up emotion will not go away,” he said.
But the longer the economy is interrupted, the longer it will take to return to what Dakoske anticipated would be a very good year for sales. He questions the ability of those in the service and gig economy to quickly recover, as well as what the downturn will do to people’s credit ratings.
There’s hope in history. Though it took several years, the housing industry recovered from the Great Recession, and a look back shows the magnitude of the recovery.