3rd Quarter Market Report 2020

By Michael Gerrity | May 20, 2020 

The Orlando Regional Realtors Association is reporting this week that Orlando's housing market in April 2020 saw its median home price increase 12%, while home sales (market activity not value) dropped 28% in the first month to show an anticipated decline in activity, as a result of the COVID-19 pandemic. Inventory experienced a year over-year decline of 3%.
 

"Our market -- like those nationwide -- is grappling with the coronavirus-induced slowdown," says ORRA President Reese Stewart. "Orlando Realtors anticipate listings and buying activity will eventually resume, especially given our history of demand versus low supply, along with the record low mortgage rates that increase buyers' purchasing power."
 

"Although the pandemic is a major disruption in regard to sales, Orlando home prices held up in April and even increased due to the ongoing housing shortage, continues Stewart. "However, while lack of inventory in the lower-price categories will likely safeguard prices, it's possible the upper-end market segment could experience a decline in values."
 

Orlando Median Home Prices
 

The overall median price of Orlando homes (all types combined) sold in April 2020 is $263,750, which is 12.2% above the April 2019 median price of $235,000 and 4.0% above the March 2020 median price of $253,500.
 

The median price for single-family homes that changed hands in April increased 9.0% over April 2019 and is now $278,000. The median price for condos increased 5.1% to $145,000 and town-homes/villas/duplexes increased 5.6% to $225,000.
 

The Orlando housing affordability index for April is 136.60, down from 137.63, down from last month. (An affordability index of 99% means that buyers earning the state-reported median income are 1% short of the income necessary to purchase a median-priced home. Conversely, an affordability index that is over 100 means that median-income earners make more than is necessary to qualify for a median-priced home.)
 

The first-time home buyers affordability index decreased to 97.14 from 97.87 last month.
 

Sales and Inventory
 

Members of ORRA participated in 2,393 sales of all home types combined in April, which is 28.1% less than the 3,329 sales in April 2019 and 25.3% less than the 3,204 sales in March 2020.
 

Sales of single-family homes (1,926) in April 2020 decreased by 24.0% compared to April 2019, while condo sales (249) decreased 42.5% year over year. Duplexes, town-homes, and villas (218 combined) decreased 37.2% over April 2019.
 

Sales of distressed homes (foreclosures and short sales) reached 61 in April and are 41.9% less than the 105 distressed sales in April 2019. Distressed sales made up 2.6% of all Orlando-area transactions last month.
 

The overall inventory of homes that were available for purchase in April (7,659) represents a decrease of 2.9% when compared to April 2019, and a 4.3% increase compared to last month. There were 8.7% fewer single-family homes; 6.9% more condos; and 42.4% more duplexes/town-homes/villas, year over year.
 

Current inventory combined with the current pace of sales created a 3.2-month supply of homes in Orlando for April. There was a 2.4-month supply in April of last year and a 2.3-month supply last month.
 

The average interest rate paid by Orlando home buyers in April was 3.20%, down from 3.45% the month prior.
 

Homes that closed in April took an average of 47 days to move from listing to pending and an average of 39 days between pending and closing, for an average total of 86 days from listing to closing (down from a total of 91 days the month prior).
 

Pending sales in April are down 36.3% compared to April of last year and are down 17.1% compared to last month.
 

Central Florida MSA Numbers
 

Sales of existing homes within the entire Orlando MSA (Lake, Orange, Osceola, and Seminole counties) in April were 32.4% lower than in April of 2019. To date, sales in the MSA are down by 7.2%.
 

Each individual county's sales comparisons are as follows:
 

• Lake: 33.5% below               April 2019;
• Orange: 35.8% below          April 2019;
• Osceola: 30.8% below         April 2019; and
• Seminole: 23.5% below      April 2019.

WASHINGTON, May 18 -- In a signal that the housing market is showing signs of stabilizing and gradually moving forward in the wake of the COVID-19 pandemic, builder confidence in the market for newly-built single-family homes increased seven points to 37 in May, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released today. The rise in builder sentiment follows the largest single monthly decline in the history of the index in April.

"The fact that most states classified housing as an essential business during this crisis helped to keep many residential construction workers on the job, and this is reflected in our latest builder survey," said NAHB Chairman Dean Mon, a home builder and developer from Shrewsbury, N.J. "At the same time, builders are showing flexibility in this new business environment by making sure buyers have the knowledge and access to the homes they are seeking through innovative measures such as social media, virtual tours and online closings."

"Low interest rates are helping to sustain demand," said NAHB Chief Economist Robert Dietz. "As many states and localities across the nation lift stay-at-home orders and more furloughed workers return to their jobs, we expect this demand will strengthen. Other indicators that suggest a housing rebound include mortgage application data that has posted four weeks of gains and signs that buyer traffic has improved in housing markets in recent weeks. However, high unemployment and supply-side challenges including builder loan access and building material availability are near-term limiting factors."

Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as "good," "fair" or "poor." The survey also asks builders to rate traffic of prospective buyers as "high to very high," "average" or "low to very low." Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

All the HMI indices posted gains in May. The HMI index gauging current sales conditions increased six points to 42, the component measuring sales expectations in the next six months jumped 10 points to 46 and the measure charting traffic of prospective buyers rose eight points to 21.

Looking at the monthly average regional HMI scores, the Midwest increased seven point to 32, the South rose eight points to 42 and West posted a 12-point gain to 44. The Northeast fell two points to 17.

Editor's Note: The NAHB/Wells Fargo Housing Market Index is strictly the product of NAHB Economics, and is not seen or influenced by any outside party prior to being released to the public. HMI tables can be found at nahb.org/hmi. More information on housing statistics is also available at housingeconomics.com.

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ABOUT NAHB: The National Association of Home Builders is a Washington-based trade association representing more than 140,000 members involved in home building, remodeling, multifamily construction, property management, subcontracting, design, housing finance, building product manufacturing and other aspects of residential and light commercial construction. NAHB is affiliated with 700 state and local home builders associations around the country. NAHB's builder members will construct about 80 percent of the new housing units projected for this year.

As noted above in the circle on the right, the impact is almost double when you purchase new construction, given the sheer number of workers it requires to design, build, equip, and finalize the sale of the home. The NAHB paints a clear picture of these roles:

“The NAHB model shows that job creation through housing is broad-based. Building new homes and apartments generates jobs in industries that produce lumber, concrete, lighting fixtures, heating equipment and other products that go into a home remodeling project. Other jobs are generated in the process of transporting, storing and selling these products.
Additional jobs are generated for professionals such as architects, engineers, real estate agents, lawyers and accountants who provide services to home builders, home buyers and remodelers.”

  By Jeff Andrews 

The economic fallout from the spread of COVID-19 has put the housing market in the United States on pause.

New home listings have dropped precipitously. Mortgage lending has gotten even more strict, making it harder to get a home loan. In March, home sales dropped 9 percent nationwide compared to the previous month, according to Redfin. The drop in April is certain to be even more dramatic.

But what will the housing market recovery look like once the pandemic passes and the economy reaches its new state of normal? A number of new reports explore how it might play out.

Academic and real estate consultant Mike DelPrete looked a new home listings data for five markets in varying stages of sheltering in place—New York City, Portland, Austin, Seattle, and California’s East Bay, which includes Oakland and Berkeley. He concludes that new home listings bottom out after just a week of sheltering in place, and stay at that bottom for 3 to 4 weeks before gradually starting to rise. 

This suggests that the housing market recovery on a graph would be shaped like a checkmark—a sharp immediate decline to a bottom and then a slow recovery back to pre-pandemic levels. According to DelPrete, New York City is currently still at the bottom point, while Seattle, Austin, and the East Bay have started to move up in terms of new listings.

Pageview data from Zillow seems to support this general theory. When the pandemic hit, Zillow saw a 19 percent year-over-year drop in pageviews nationally on March 22. As of April 15, the seven-day trailing average for pageviews nationally was up year-over-year by 18 percent. This suggests the buyers and sellers are resuming their home search and will be ready to buy and sell again when quarantines lift.

But Zillow pageview data varies across markets. In New York City, one of the hardest hit cities in the world, pageviews are currently still down by 2 percent year-over-year. But Austin is up 35 percent year-over-year, Los Angeles is up 32 percent, and Houston is up a whopping 56 percent. This suggests that cities with big year-over-year jumps have pent up demand for housing.

  Ralph McLaughlin, chief economist for homebuying platform Haus, forecasts that the pandemic will cause a sharp drop during the spring and a noticeable rebound in the summer. He believes this will be followed by another dip in the fall as a result of a second wave of the novel coronavirus, and then something of a return to normal in spring 2021. He forecasts a 35 to 45 percent drop in home sales over the next three months, and as much as a 50 percent drop in single-family building permits for the rest of the year. 

Notably, he doesn’t expect home prices to fall by much, if at all. In the worst scenarios, he says home prices may fall between 1 and 2.5 percent in markets in the West Coast, Nevada, and Florida. This is consistent with what’s become the conventional wisdom around the housing market during the pandemic: home sales will drop dramatically during shelter-in-place orders, but prices will be largely unaffected.

Of course, predictions and forecasts made in the midst of the pandemic should be taken with a grain of salt because there are so many uncontrollable variables. It’s unknown how long the pandemic will last, whether there will be a second wave of it in the fall or winter, or how well federal and state officials will manage the crisis.

There is also the unresolved issue in the mortgage industry surrounding mortgage forbearance. Federal regulators have offered up to a year of mortgage forbearance for homeowners effected financially by the pandemic. While this provides relief for homeowners, it also stops money from flowing through the mortgage industry. If this problem is mismanaged and parts of the mortgage industry fail, it would certainly slow down the housing market recovery.

         Coronavirus update as it relates to today’s pricing. Analyzing a true market depreciation that is expected in home values in the coming weeks or months is extremely difficult. We constantly participate in online interviews and virtual chats with top experts in the Building, Mortgage, Appraising and of course the Real Estate fields. No one has the exact answer. Some predict extreme long-term negativity and others, I would say in the majority, believe this to be a short-term dilemma and expect housing to come back strong with gradual momentum. WHEN exactly this will start is the big question. 

However, even the most optimistic experts see a short-term problem especially with home values. Some of the experts say on a national level we could see double digits in negative values, but the majority seems to think it will be somewhere between 3%-6%. This can change daily, and we will continue to monitor. Most of the major cities with extreme luxury properties such as New York City, LA, and Miami have seen substantial price drops over the last 6 months before the virus came into play. I believe this is due to the oversupply of luxury homes, especially new construction homes, with price tags over $20million. There are simply not enough people in the world that can afford homes at these prices or would spend if they did

We believe our luxury market in Central Florida is still very affordable to the world for what you get even at $5mill to $8mill price tag. We also believe our local market is strong and will continue to support our existing pricing. If we do see a 3%-6% dip in values, we expect to make it up rather quickly.

Our team is still marketing and showing properties both in person and virtually and we will continue to always stay optimistic. We specialize in Orlando’s luxury market and there is no room for negativity of any kind. The need to stay positive and sell the exciting lifestyles the properties we represent is needed now more than ever.

“Despite Pandemic, U.S. Home Prices Could Very Well Hold Steady in 2020. Sales are likely to decline precipitously, but the housing market faces far fewer challenges than in the last economic downturn”. Real Estate Strategist for UBS Wealth Management Americas

On April 6, 2020, we released an update regarding Orlando real estate and what we are hearing from experts in the industry and what we think our local market will expect from the COVID-19, see page 9.

Today, April 18, 2020

Our Team continues to monitor the market. Amid all the uncertainty, we feel it is more important than ever to be able to share our insights as it relates to our local housing economy. As the coronavirus (COVID-19) continues to restructure the way our world is unified, from how we conduct business to how we live our lives.

COVID 19 has had a tremendous impact on the spring Orlando real estate market. The coronavirus is neither sending housing prices down nor sending prices up, prices are stable. This real estate balance is due to the number of available buyers vs. the number of available homes that are about the same. What has happened is a massive drop in home buyers and a massive drop in available homes for sale on the market. We noticed the largest drop in Orlando home buyers came late March, perhaps the biggest drop in a single week we have ever seen. But since then, home buyer traffic has leveled off. We believe home buyer traffic will remain stable until the restrictions in the Orlando area have loosened and then it will increase with pent up demand, possibly skyrocket sooner than later.

Prices are unlikely to go up or down in a significant way, anytime soon, due to the recent real estate balance (supply vs. demand) staying the same. Prior to our shut down from the virus, we were seeing a month after month increase in values with homes over $1 million including several record sales of our own. As you will see in the charts below, although difficult with loosing much of our buyer activity, we are still stable in our luxury prices.

Areas of concern we are watching - 

Currently, the housing and mortgage markets are reacting very differently to the COVID-19 pandemic. The mortgage industry was having a rough time before the virus came in to play due to over lending capacity. Now mortgage late payments and job loss is at the forefront. FHA loans now require a minimum of 680 credit score, Jumbo loans are considered high risk and are being eliminated by several lenders and the same with Foreign National loans. Let us not forget the stock market roller coaster, commodities and commercial real estate is currently being affected the most. However, residential real estate is what many, including us, believe is going to bring back the economy. 

Orlando area real estate sales will continue (almost as normal), but with much less transactions. If you have a home to sell, it will likely sell for a good price in a reasonable amount of time and the time to prepare is now! If you want/ need to buy a home, real estate market inventory will be reasonable and the sales process (other than practicing social distancing) relatively normal. Our team is ready with 100% social distancing options for buyers and sellers and have prepared a simple step by step guide.

According to a recent Zoom conference featuring Barry Habib, CEO of MBS Highway – Chris Whalen, Chairman of Whalen Global Advisors LLC – David H. Stevens, CMB & CEO of Mountain Lake Consulting, Inc and Anthony Casa, Chairman of AIME, the following items were noted. 128 Million US Households. 64% of those households own their home. 40% of those have NO mortgage and the remaining 60% have an average Loan to Value (LTV) of 53%. Example: a home of $400,000 would have a $212,000 mortgage (The National average is more like $135,000 mortgage on a $254,000 value). Massive amount of home equity on a National level. This team, who is working directly with the Federal Government, unanimously agree a short term dip of 3%-7% in national home values due to the job market but residential housing will start its come back around in Q3 and will make up the loss within a year and will continue value increase for another 5-7 years. Rates will also continue to stay low for a long time to come.

Another Zoom conference we attended featured Tom Ferry, CEO of Tom Ferry real estate coach, author and speaker - Steve Harney, Founder & Chief Content Creator of Keeping Current Matters and David Childers, VP, Content & Marketing with Keeping Current Matters had similar outcomes with several studies the team performed and presented with graphs and charts shown below. One thing they stressed to keep in mind about todays pandemic versus the real estate crash of 2008 is we are in a Health crisis NOT a Housing crisis.