We’re now getting our first indication of how the coronavirus may affect the once booming housing market, thanks to a blog post from Redfin boss Glenn Kelman.
It’s not good news, as indicated by the title of this post.
RedfinNow Hits the Brakes
- The real estate brokerage is no longer buying homes for cash
- Unclear how long they will pause their iBuyer business
- Doesn’t bode well for housing market sentiment
- But understandable given the uncertainty surrounding coronavirus
On the surface, the company isn’t interested in buying your home for cash anymore, at least not at the moment.
This doesn’t necessarily mean they think the housing market is going to tank, but it does seem to signal some uncertainty on their part.
So that’s a little bit unsettling, though perfectly understandable for a large, publicly-traded business to disclose that material event.
By the way, Redfin stock has fallen from around $33 per share a month ago to just over $10 today.
It fell nearly 25% on Wednesday as the coronavirus continues to ravage the economy.
The company did not indicate when they’d relaunch RedfinNow, but for now, it appears to be on hold.
Home Buying Demand Has Taken a Hit from Coronavirus
- Home buying demand was up roughly 27% in both January and February compared to last year
- Last week year-over-year growth fell to just 1%
- And in the past few days it has turned negative
- Probably a taste of what’s to come as social distancing and self-quarantines take effect
Now onto that post from Redfin CEO Glenn Kelman. He opens by stating that “home-buying demand took a big hit.”
By that, he means year-over-year growth dropped from nearly 27% in January and February to just 1% growth over the past week.
And in the past three days, there has been a contraction in home buyer demand.
In other words, the spring housing boom we were all waiting for, spurred on by those new all-time mortgage rates, is toast.
In short, we’re all basically quarantined in our own homes or apartments, so virtually nobody is even thinking about touring someone else’s house.
However, while Kelman said most open houses have been canceled, including all of Redfin’s own open houses, some real estate agents are still out there trying.
He mentioned one showing in Hoboken, New Jersey, where Redfin agent Noah Goldberg said six groups of potential buyers were being staggered like a Disneyland ride.
Goldberg added that his activity was down by half now that the coronavirus is here in the United States, and not just some far away land.
Home Purchases Are Still Closing, But…
- Some Redfin agents say it’s business as usual
- But home purchases just days from funding will probably still go through
- Need to worry about homes that just went pending and new listings
- Might see fallout as outbreak worsens, and there may be disruptions as ancillary services close
That pessimism aside, a Redfin manager out of Jacksonville, FL said it was “business as usual,” with closings taking place all week.
Of course, those who are near the finish line probably have a much smaller likelihood of pulling out versus those just under contract, or those who have yet to find a home.
Meanwhile, a Washington D.C.-based listing agent said two of three listings that hit the market just last week were already pending.
Sadly, last week is a lot different than THIS week. So my expectation is for a lot of these positive outcomes to change pretty rapidly.
Some of those offers may also fall out of escrow depending on how bad things get.
Kelman added that the number of listings activated on the MLS over the past week was still up 0.5% year-over-year.
Once again, a caveat. Most of these listings debuted before the weekend, and a lot has changed in just a few days this week.
He was surprised to see an increase in new listings in some of the cities hardest-hit by the coronavirus, with volume up 9% YoY in Seattle and 6% in the Bay Area.
There have also been rumors that with courthouses closed, sales wouldn’t be able to be recorded. But Kelman notes that most counties nationwide support electronic recordings.
Redfin Has Stopped Buying Ads
- Company halted both mass-media advertising and digital ad buys
- Will continue to advertise on behalf of their home sellers
- Appears they are uncertain about direction of the housing market
- If everyday Americans feel the same way it could be a rough year for the real estate industry
In one final ominous sign for the housing market, Kelman said his company has stopped purchasing advertising to promote its brokerage.
The only ads they’re buying are custom digital campaigns they create for each listing customer, so they’re still supporting their home sellers.
Redfin ceased the purchase of mass-media advertising on March 9th, and halted digital ad buys a week later.
In other words, they don’t sound very bullish on the housing market right now. However, they might just be taking a wait-and-see approach to see how everything pans out, instead of throwing caution to the wind.
Unfortunately, if prospective home buyers do the same thing, it’s going to be awfully hard to sell a home right now.
The silver lining, if there is one, is that mortgage lenders can better manage their refinance pipeline instead of worrying about home purchase applications.
And maybe that will allow them to finally lower mortgage rates again once volume slows.