Springfield Business Journal Editor Eric Olson talks residential real estate May 12 with Dan Holt, operating principal at Keller Williams Greater Springfield; Leslie Horner, co-owner and broker at Better Homes & Gardens Real Estate Southwest Group; Jeff Parker, managing broker at Murney Associates, Realtors; and Rick Witeka, senior vice president at ReeceNichols Real Estate.
Eric Olson: With all that’s going on with the pandemic and the economy, what’s the temperature of the residential real estate industry in one word?
Jeff Parker: Excited. Even with the pandemic, numbers are really solid. It’s kind of proved that the market is as strong as it is that we’ve had very slight decreases throughout this. I anticipate when things open up and people feel safer, that summer is going to just be fantastic.
Dan Holt: Opportunity. There’s opportunity anytime there’s any downward shift or any pullback in the market at all. There’s opportunity to then essentially reload for what’s coming. This has essentially been a little bit of a bottleneck. There is starting to be pent-up supply and demand for those who are prepared to take the opportunity.
Rick Witeka: Surge. With the pandemic for over the last eight, nine weeks that we’ve had, business did still go on. Sellers still did put their homes on the market. Buyers still have the need to buy. With these last eight, nine weeks that pent-up energy is still there. We’ve already seen the momentum since the lift (on May 4).
Leslie Horner: Demand. We’ve got a lot of buyers that right now are just sitting by the sidelines waiting for something to come on the market that they can pounce on. When the floodgates open, it’s going to be super busy.
Olson: The other side of demand is supply. Where are our supplies sitting at? There has been a shortage of available homes.
Horner: I think they’re still pretty low. They were already low before the pandemic hit, so now they’re I think even lower. We’re still getting new listings every day, but probably not as many as we need to cover the potential buyers out there that are looking.
Parker: If there’s one weakness that we already had coming in, it was supply. We’re still showing that. If you want to look at any number that has kind of struggled, we’ve taken fewer new listings than we did last year. That’s the largest decrease.
Witeka: We’re thinking the listing shortage is going to be even worse than it was last year.
Olson: Do you have some numbers that reflect that?
Parker: We’re about almost 4% down in new listings. You compare that to sold numbers, we’re only 1.8% down. That’s the market as a whole, Greene, Christian and Webster [counties]. When you consider what has been going on nationwide, for our market to be down 1.8% in sold [homes] that doesn’t have any concern to me.
Holt: Was that year to date?
Parker: So far this year.
Holt: I pulled a really hyperspecific number of what April 2020 looked like versus April 2019. That month was down 10.9% on listings taken just for the month. But the under-contracts were only down 5%. Under-contracts didn’t drop as fast as the listings, which means the supply is even more important. It shows you how strong January, February and March were over the previous year – because to have a 10% drop and yet the numbers be down only, what did you say, Jeff?
Parker: 1.8% for solds.
Holt: The first quarter really carried us this year in record numbers that I hadn’t seen historically in the past.
Olson: What’s behind the historic quarter?
Horner: A lot of it had to do with the economy being as good as it was. People felt good. Unfortunately, it didn’t last, but they were feeling good about their jobs and about their situations financially.
Witeka: With the confidence and the interest rates, they’re still just incredibly low. You couldn’t have had a better opportunity to buy a home. Or refinance.
Olson: Interest rates became a big part of the coronavirus story, the reduction of those rates to all-time lows. How long do you think rates last at that level?
Parker: I read Fannie [Mae] is predicting below 3% at the beginning of next year. We’re looking at low rates for a while, but no matter what, when you pump that much money into the economy, we’re going to have some inflation and rates are bound to rise. Maybe mid to the end of next year, maybe start seeing a creep up. At 3%, it’s got a long ways to go before it makes home ownership unaffordable.
Holt: Since 2007, 2008, 2009, when we’ve had the first historic lows, it’s really not gone up above 5% that I’ve really heard of. It’s been historic lows for 10 years. And in the midst of a pandemic, it’s also an election year. I don’t see any party jumping really hard on raising interest rates in the midst of that.
Horner: I think our interest rates will stay pretty decent for at least midyear next year.
Olson: Plenty of refinancing, but are homes moving? What’s the state of home sales right now? Some statewide numbers from the Missouri Association of Realtors in March: Home sales were down throughout Missouri, 19%, but sales prices were up nearly 7%. Can you localize those numbers?
Parker: We did one through April and median list price was up 2.3% and median sold was up 1%. Home prices have remained strong.
Witeka: We saw a 4% [increase in home prices sold].
Holt: We’re fairly consistent with that. April over April, 2019 to 2020, the days on market was exactly the same.
Olson: The statewide home sales volume being down 19%, based off of the numbers that you guys have just stated, that must be Kansas City and St. Louis influenced.
Holt: The number was 19% on units and 7% up on volume. What we’ve seen, at least when we look hyperspecific in our office, is that the volume always follows the units. The lag is the volume and the leading indicator is the unit count.
Olson: Extending our outlook here through the rest of the year, Fannie Mae this month predicts home sales will drop by nearly 15% on the year. They’re projecting sales of 4.5 million units, down from 5.3 million units in 2019. If you had a crystal ball, what would you see locally?
Parker: I would say less than 5% difference. That’s just judging from where we’re at and barring any major catastrophes or resurgence of shutdowns. I don’t think we’ll have an increase next year.
Horner: That’s one good thing about living in the Midwest. You don’t get the huge spikes in prices and units, but you also don’t get the huge dips.
Holt: The transaction count may be down as high as 5%. Yet, if our volume, because of our average sales price is still up, as Rick said, even 4%-6%, that’s still going to outsell 2019 on a volume number even though transactionally it may be down.
Olson: Let’s take a quick look at higher-dollar homes on the market. We’ve been tracking those specifically $500,000 and above list price within the city. In February and March of this year, there were 13 and 15 listings north of $500,000 and in April there were 10 listings in that price category. Only one of those was listed above $1 million; previously there were three or four above $1 million. So, it softened in April. What does the high-end home activity say to the market at large?
Witeka: What we’ve got throughout southwest Missouri, we’ve got about 27 on the market that’s active at this point. We’ve sold seven. The average list price was $1.2 million and average days on market was 99 days. Southwest Missouri is not a heavy high-end market. With the interest rates dropping to where they drop so low, we started to see some of those midrange sellers that were in those $300,000-$400,000 up to about $500,000, they were starting to reach because of these interest rates and because of the equity in their homes. We were starting to see some more activity on purchases with those high-end homes. Not as much in southwest Missouri, but we saw it around St. Louis, Kansas City. If they’re looking to upscale and upgrade, it’s a perfect time to go into a higher-end market.
Parker: We sold more homes above $500,000 this year than we did last year. I just used Greene and Christian [counties], but we had five above $1 million sell this year. That’s not an indicator of our real estate market. It’s pretty consistent year over year regardless of economy.
Holt: I would guess, on average, no more than 12 houses over $1 million in Greene and Christian counties sell every year. I did pull before this all houses over a list price of $1 million in Greene and Christian counties. We’re already at more closed and under contract this year than closed in 2019. Pandemic was already a real thing in January, and yet the consumer confidence was still there. If you think of an average sales price or a purchase price of over $1 million, that’s still extremely affordable for what you can purchase, the buying power in this market.
Horner: We’re seeing, and probably we’ll see more, people come in here from the coastlines that are either retiring or they’re just wanting out of that and moved back to our area and they’ve got the money to buy those high-end homes.
Olson: Have the agent levels softened at your companies?
Witeka: We haven’t seen anyone get out of the business. Recruitment has been very strong over the last two years. This year started out recruiting very strong. For us, the last eight weeks that did get very quiet. The phones are starting to ring a little bit again.
Parker: I think we may see a little less people get in the business this year than would have otherwise. We haven’t lost any agent count. We’ve got a number of agents with new licenses that we’ve had a little trouble getting licensed because the state’s office has been closed off and on.
Horner: I’ve got several agents that are getting their classes finished up and with all of this that’s going on with a pandemic, they can’t even take their test until sometime in June. So it’s put them back two to three weeks of even getting their test taken.
Holt: God forbid they quit their job to get into real estate at that time because they’re in a holding pattern.
Olson: What about existing homeowners? Do you expect more people will take this time to reinvest in their homes? Or maybe it’s a good time to buy more investment property?
Parker: The investors never did leave the market. They might’ve slowed down. A few of the banks have backed off. I believe that was temporary. Investors are going to stay in the market all year, especially with interest rates low and rent strong.
Witeka: We don’t see our investment market being affected by this. Hopefully, there won’t be a backlash on it.
Holt: The interesting thing about this pandemic … it’s become more consultative. And it’s been more consultative on the front side of transactions than it ever has been. In the past, I think the rush was to get the lead and then to show or get the listing appointment, then consult through the transaction. Now, we’re consulting up to the transaction and then we’re doing the transaction because of the way that we’ve had to communicate over the last eight weeks with people. People didn’t want to meet face to face. I’ve done more listing presentations via Zoom. I’d never done one before. We’ve only seen a dip of 1% in the worst 30-day shutdown that we’ve seen in 10 years. People who are interested in selling have an emotion or a feeling that they may think this is what’s happening and when we can be the experienced agents and show them that feelings aren’t discounted, but they’re not factually supported by the numbers. Now is still a fantastic time to buy or sell real estate.
Olson: What about first-time homebuyers? What types of homes and buyers are you working with today?
Horner: What we’re seeing is a mixed bag. We’re seeing a lot of single millennials purchase a home. They’re out of college, maybe they’ve got a decent job, and surprisingly single women are buying a home instead of renting.
Parker: People are getting married later in life now, and they’ve got good jobs. More and more, young people, no matter what they hear about renting, know if they’re paying rent, they’re still buying a house. They’re just not buying a house for themselves. That first-time homebuyer market has always been strong here.
Witeka: A lot of these buyers, whether they’re first-time homebuyers and they’ve got new jobs or they’re middle-of-the-road buyers, they are wanting homes that are pretty well ready to go. We don’t see a lot of them that are wanting to do major renovations or major fix-ups.
Olson: In the last year, we had one major brokerage close their doors, Coldwell Banker, and another one start up, AMax. What’s the market for the real estate industry as a business? Will shakeups in brokerages keep happening?
Witeka: We’re still seeing that happen and we’re still looking for that in our neck of the woods.
Horner: We’ve seen a lot of smaller agencies pop up, different ones with anywhere from one to five people working out of them. We’ve seen that before. In 2008, we saw quite a few of those people pop up here. If they take the time to learn the business and get their education, they’ll make it. But if we have another big downturn, what we saw before was a lot of those ended up merging with somebody else or going to work for one of the bigger companies.
Holt: It’s also a sign of a rising economy. You’ll see more businesses pop up as the business expands to support them. I think we’ll also see mergers and acquisitions of teams and potentially people who were in the business in 2007, 2008 and 2009 and just now built their business accounts back to where they were. And there are some concerns and questions of where is this going from here. That just creates question and question creates opportunity and, to steal Jeff’s word, opportunity creates excitement.
Excerpts by Features Editor Christine Temple, email@example.com.
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