June, July and August are the new March, April and May. At least for 2020 in the real estate market.
With the COVID-19 pandemic causing a shutdown of many of the common practices of Real Estate 101 — namely brokers showing houses to potential buyers — and fear amongst sellers, the industry is not only dealing with lower inventory than normal, but changing the way its business runs.
“There has been a big learning curve as agents have had to adapt to showing houses virtually or allowing buyers to see houses unaccompanied, so it has not been business as usual,” Houlihan Lawrence Scarsdale branch manager Nancy Chochrek said. “We’re definitely looking forward to resuming in-person showings and actually taking buyers onto properties. That being said, we’ve managed to get deals done.”
Virtual tours are not new in real estate by any means, but they were not as widespread until the pandemic forced the industry’s hand. There was a big scramble to get up to speed in a short time.
“I do believe that the virtual aspect with the tours and open houses and floor plans are here to stay,” Scarsdale sales manager Athena Miles of William Raveis said. “Agents who aren’t learning how to be virtual are making a mistake. I don’t think that’s going anywhere.”
Instead of going to see six or eight houses, if buyers have virtual tours they can pick two or three to see, which in the end saves both the sellers’ and the realtors’ valuable time.
“Think about how many houses you could eliminate if your realtor stood on the back deck and took their phone and gave you the 180 degree video panoramic tour of the backyard and you saw the neighbor’s yard,” Miles said. “You know without getting in your car, going there and exposing yourself that this house is off the list. The agents tell me it’s a lot more work than a regular open house. Yeah it is, but think about how much time you’re saving not having to drive your people around to see all these other houses. It’s a shift.”
Strong photos and virtual tours have long been a priority for owner Jon Lerner and Five Corners Properties, which gets a lot of business from people looking to relocate from overseas and around the country. He’s said he’s used to selling without physical visits.
“I think we’ve been unique in that we’ve been way ahead of the curve with virtual video tours… something we’ve been doing the last 15 years,” he said. “We’ve always been used to speaking with them in Boston or Berlin and showing homes with video or an iPhone. That was very helpful.”
With demand high as there is a mass exodus coming from more densely populated areas like New York City, buyers are getting on board with the new sales strategies.
“Buyers are getting more accustomed to looking virtually first and then making their arrangements to see [properties],” Mark Nadler of Berkshire Hathaway HomeServices said. “We have several deals which are selling over $2 million and the buyers saw the properties without the brokers physically being present. It’s the way we’re doing business and buyers are getting more comfortable and brokers are getting used to the new normal.”
Realtors are accustomed to working on the go and out of their cars. Many do not have office space, nor do they need it. Now they’re just communicating differently and, like everyone else, using Zoom and other applications to keep connected. Even staff sales meetings will likely continue online. It’s just another time and money-saving measure.
“I think you’re going to see this become part of our new normal,” Nadler said. “You’re probably not likely to see the return of public open houses any time soon. Until the virus is substantially under control possibly with a vaccine, and it’s not a serious threat to people, I think we’ve got to treat it that it’s a health threat to most people.”
“The interesting thing as a manager is I’ve seen a shift in some of my agents who didn’t do a lot of business before who are suddenly doing a lot more business,” Miles said. “It tends to be the ones who have the younger kids. Now I’m finding because maybe they’re not out running around with the kids that they’re more focused on work. I have agents who did very little before who are now doing lots of business, which I think is great.”
What buyers are looking for has also changed. A year ago a small house and small property were OK. Now buyers are looking for more property and the demand for home office space is much greater.
“It is a little bit of a shift,” Chochrek said. “Especially with COVID … going into the spring and warmer months, people definitely want to have room to play. And I think in terms of more square footage people are concerned about having room to work. Home offices were not so high on people’s lists in the past.”
Both buyers and sellers have a chance to reevaluate their needs.
“In light of what’s happening with the virus they’re looking for things they weren’t looking for originally,” Lerner said. “They’re looking for open floor plans, more space, bedrooms, office space. The backyard is now more important… Coupled with the increased demand we’re seeing a tremendous amount of people from New York City. The numbers that I saw last were that 30 to 40 percent of people on the Upper East Side are not there right now. They’ve temporarily or permanently moved out of the city to other communities like the Hamptons, New Jersey, Connecticut and Westchester.”
A place like Scarsdale has plenty of space to offer in backyards and places for walking and biking throughout town, and social distancing is not an issue in most situations.
“In a town like Scarsdale where people are buying for the location and the schools’ reputation, a lot of buyers have the money to do renovations, so they will be buying because, for the most part, the house is what they want with the understanding they’re getting the town and the schools and the location they want and that eventually or maybe immediately they will do the upgrades to the house to make it their dream home,” Miles said.
For buyers and sellers alike it comes down to comfort level. “As people get more comfortable I think we’ll see more inventory coming on the market,” Chochrek said. “People want to move here. They want to get out of the city. If you’re going to be quarantined, this is the place to be quarantined.”
Houses that are “correctly priced” are getting the most attention and selling the quickest with great interest.
“I feel like sellers are more realistic in their pricing now because they understand that if you’re selling now it’s because you need to,” Miles said. “It’s not ‘maybe test the market and see if we want to move.’ These are people who are allowing potential corona into their homes. They’re going to be realistic and make the effort to listen to the agent and get it on the market at the right price… Anybody who is buying is understanding that there is a total shortage in inventory so they better find something and find it fast.”
With the Mid-Hudson region, which includes Westchester, in Phase 1 of the New York Forward reopening initiative, realtors eagerly await Phase 2, which includes the restart of real estate practices as early as Tuesday, June 9, with guidelines about things like showings, open houses, wearing masks and sanitizing.
“I think as the restrictions are being loosened or lifted, I think in some regard you are going to see an increase in the listings,” Nadler said. “In some regard I think the answer is going to be not as much as you would probably see in normal spring market. There are still people who don’t want people coming in their houses.”
That said, according to Nadler, not all realtors are following the state’s guidelines. Nadler said it’s been “divisive” within the real estate community.
“There’s a very big percentage of the realtors who feel it’s overburdensome for them and their chances of making a livelihood, a lot of brokers who are dismissing it and continuing to show properties as if the executive order does not exist and it’s creating a lot of controversy within the business,” he said. “It’s clearly not legal yet. I’m hopeful we do get to Phase 2 so this part of the challenge of the industry subsides.”
Like many, the realtors fear a second wave of COVID-19 in the fall, which makes the next three months crucial for sellers and buyers. At the same time, back in March and April many were skeptical that there will even be a summer real estate market to lift the industry.
“That is really dependent on does this thing disappear? Is this like the flu and it’s going to ratchet back up in the fall?” Compass managing director Zach Harrison said. “Obviously I pray it doesn’t, but that’s the real wild card. God forbid there’s a second wave into late September, into the winter season you could see a very compressed market in July, August, September where people are rushing to make deals happen.”
While realtors are hopeful supply begins to catch up to demand, just knowing the interest level in the area is high has boosted their confidence.
“With the additional demand I honestly feel we’re lucky to be in an industry that has that opportunity to have that bounceback,” said Scarsdale brokerage manager Brian Murray of Julia B. Fee/Sotheby’s. “That pent-up demand is what is going to keep our market moving for a while.”
By the numbers
The period from December to the first signs of the pandemic in early March was strong for the local market, according to Murray.
“We were starting off the year with such an amazingly strong quarter,” he said. “When we first heard about [the pandemic] most importantly we needed to get the deals we had to closing. With town halls being closed and things like that, everyone really rallied and our deals got closed and new deals continued to happen, but the demand of our product outweighed a lot of the uncertainty.”
Realtors beat the odds in May to make deals. “It is not impossible to make sales happen,” Glorianne Mattesi of Douglas Elliman said. “During the month of May, 31 homes went under contract priced from $849,000 to $4,250,000 in the Scarsdale School District. Business is still getting done, but differently.”
In examining the Scarsdale numbers, Harrison said there was an uptick in deals that went to contract the last two weeks of May as 23 single family houses sold in Scarsdale compared to 21 a year ago during that time.
“Why that is notable is there are still many restrictions in place for what agents can do,” Harrison said. “There is also still stay-at-home for people living in the city. They’re not supposed to leave their apartments. The fact that there’s been an increase the last two weeks is extraordinary.”
In the city, where Harrison also oversees agents, transactions are down 80 percent over the past two months.
“Typically both markets move in tandem and the fact that they’re moving so differently is just a testament to how challenging it’s been in the city and also this general trend of people from the city looking to move out to the suburbs because they’re cooped up and they want more space for their families,” he said.
Lerner has been through ups and downs in the real estate market before. From the gas shortage in the 1970s to 18% mortgage rates in the 1980s to the economic crisis in 2008, he’s seen real estate rebound from every challenge. “There’s always been turbulent times and eventually we bounce back,” he said. “We’re definitely always trying to be optimistic about it.”
The Florida market, a popular destination for Westchester empty nesters, is also heating up. “We’ve been sending a lot of referrals down that way and I can tell you those markets are incredibly busy right now,” Lerner said. “I’m in negotiation for a home down in the Palm Beach area for a client and the house had been sitting for six months and the past week or two the house has gone into multiple bids. This is nothing new to Scarsdale. This is the cycle of Scarsdale.”
Last year from March 15 to 31, there were 15 deals that went to contract in Scarsdale. This year there were 14, but those buyers had a chance to see the properties before the outbreak. April was telling — last year 26 houses went into contract; this year with a lockdown there were 10. “A major difference,” Harrison said.
May saw a huge decrease of houses on the market. Last year there were 213 in Scarsdale, this year 120.
“We had that little bit of a roadblock in the spring market and the number of houses on the market is still low, but it’s still in line with numbers we saw 10 years ago,” Lerner said. “It’s only the past couple of years that the numbers doubled in terms of what was on the market. If you go back 10 or 15 years ago it was 100 or 150 homes during the spring season. It’s the last two or three years we’ve seen 250 homes on the market. It’s nothing that out of the ordinary, more a temporary roadblock than the market collapsing.”
Nadler broke down the 115 current listings in Scarsdale Village by price point on Tuesday, with listing prices ranging from $729,000 to $11 million.
In the $1.5 million and lower bracket there are 34 houses with an average price of $1,172,000 and a median (or middle number) of $1,197,500. From $1.5 million to $3 million there are 33 listings averaging $2,264,000 and a median of $2,149,000.
These two price points, most notably $1.5 million and under, will be the ones that are likely to generate the most interest and multiple bids.
The $3 million to $11 million market is vast with 48 houses, with a low of $3,150,000. And among that overall group, 17 of the houses are priced at $3 million to $3.5 million.
“What that’s telling you is that with the increase in demand from people who are looking from the city, there’s some upward pressure on price points and the properties that are priced well are selling typically very quickly with multiple people bidding on them,” Nadler said. “I’m not sure that’s the same story once you cross over the $3 million category at the top of the market.”
Referring to May 29 data, Chochrek said, “As far as listings, we’re down 45%, but as far as pending sales, we’re down only 14%. That’s really kind of amazing. There’s definitely strong demand at almost all price points.”
Last June, there were 197 listings in Scarsdale, 161 in July. This year’s numbers remain to be seen, but the realtors are unified in their optimism for the summer market, especially with low interest rates that are predicted to go even lower.
“What I’ve always seen in the Westchester market and the Scarsdale market is that when the rates are low, regardless of what else is going on in the economy or the world, you see an uptick in buyers,” Harrison said. “It’s like clockwork. If the rates are going to be under 3% over the next six months, that is definitely going to have a major effect in terms of activity I would expect. If you’ve got a chance to lock in at a very low percentage, people want to take those opportunities.”
With everything seemingly out of whack in the world right now, the local real estate market is a bit of an outlier.
“It has definitely started to pick up and as soon as we are released — hopefully next week we’ll be starting Phase 2 — hopefully there’s going to be a big influx, which is why I’ve been telling my agents that if they’ve got somebody waiting to sell, tell them not to wait,” Miles said.
“Sales will continue to grow,” Mattesi said. “The summer market will be strong due to the pent-up demand. Plus the interest rates are very favorably low.” She added that the condition of the house is important and following agents’ advice on painting, cleaning and staging is key because “buyers want to move right in.”
Nadler said, “I am encouraging anybody who is contemplating making a move some time in the next several months to the next six months to list their property now. You still have a surge in demand, courtesy of people in apartments or in New York City or out of area who are still moving.
“This is like we’ve reset our calendar almost like it’s March 1. In many regards it’s like we’re back to the beginning of our spring market.”