It seems that Covid19 is all that the whole world is talking about right now. If you’re anything like me, you might be getting tired of it. But if you’re 55 or older and have been considering a move to a 55+ community, where does that leave you?
These are strange times, to be sure.
There is a hint of irony behind all of this though. Every day, I see headlines saying that the housing market is crashing, or that it’s still booming. Most of it is speculation by people who don’t have a clue.
Since we’re in the 55+ active adult housing industry, I thought you might appreciate our perspective on the situation. Perhaps it might help you make your own decisions.
The 55+ Market: Spring 2020
Where we came from
It helps to know where we came from, to give you some perspective. So last year, around this time, most of our communities were averaging around 12 visits per week from folks who hadn’t been to one of our communities before. For us, this is a healthy amount of new traffic. On top of that are return visits, but we won’t go into those numbers today.
With this kind of traffic, we were able to sell about 4 homes per month in each community. However, as 2019 progressed, I think that people were starting to feel the pressure of an over-extended bull market. Historically, we have a recession every 4 years, but we hadn’t had one of those since the Great Recession. This is partially due to the extended nature of the Great Recession, and partly due to Federal policy that was intended to prop up an economy that was already doing better than it probably had any right to be. Adding to this, was the fact that home prices had been going up, and even though demand still overpowered supply, many people were getting price fatigue.
Because of this, the market for new homes above $350k started to slow in Utah. Since only starter homes, those super compact row-homes, were the only ones selling below that price range, many move-up homes were feeling this squeeze.
As a result, towards the second half of 2019, we saw little to no price increases in homes. There were even a few discounts to be found emerging.
Where we are in April 2020
That brings us to today. The US economy was primed and ready for a pullback, especially in the equities market. All it needed was a good trigger. Enter Covid19.
You may wonder why we had such a massive selloff last month in stocks, well, it was because everyone was already thinking recession before the economy got shut down, so they were ready to sell stocks. Add to that, the fact that the governments around the world have given many businesses a mandatory vacation, and well, how can anyone expect the economy to do well under those circumstances.
What does this mean for housing?
Demand for housing in Utah is still extremely high. Utah has a growing population, spurred even more by all the software engineering companies that have moved into town over the last couple decades. Many of them are still able to work from home, meaning that some of Utah’s population is insulated to a degree.
The leisure businesses like restaurants, bowling alleys, and theaters to name just a few are really struggling. Retail is a mixed bag. Groceries are doing tons more business, and the medical industry is plodding along. Hopefully the government’s actions will help those hurt most by this.
So while Utah is going to be hurt by this, a lot of the state should pull through all right.
Commercial construction is slowing, but residential construction is still going strong. To put it into perspective, let’s look at the numbers again.
As I mentioned earlier, our 55+ communities were getting an average of 12 new visits each week, selling about 4 homes per community each month. During this quarantine period, our new visits have dropped to somewhere between 4-7 new visits per week, with an average of 3 sales per month per community.
What this tells us, is that people are still wanting to move, and while half or more of our normal traffic is sheltering in place, those who are coming out to visit us are still very interested in buying.
Many of them are also encouraged by the mortgage rates that are being offered at this time. With all the government spending to curb the economic impact of this recession, I wonder how long low interest rates can continue, especially if inflation decides it doesn’t like all this extra money the Fed is printing.
From our discussions with new visitors to our communities, those who had their money in stocks are feeling the pinch right now. Those who weren’t buying houses from their stock portfolios are seeming to shrug this off more casually than much of the millennial generation. Whether this is because this isn’t their first economic rodeo, or some other reason, I can’t say. Nobody wants to get sick, but aside from a bit of extra caution on that front, the consensus that I’m hearing, is that this will eventually pass.
Where we are headed to finish out the year
So is this a buyers market or not?
While it’s true that mortgage rates are at historic lows, fear is also a high motivator. I think it’s interesting to note, that last year, people were holding off on purchasing a new home because they were waiting for the market to go down a little.
Now that it’s down a little, those same people are scared of buying a home because they are uncertain of what the market is going to do long-term.
There’s no doubt about it, we’re all in for a rough ride over the next couple of months. Depending on which hour you watch the news, you may feel extremely optimistic or very pessimistic about the future.
However, and this is just my opinion, I think that people can only be afraid for so long. I think that come Summer, kids won’t have anymore homework to keep them busy, parents are going to go stir-crazy if they don’t get out more, and life will start to balance itself out again.
I expect that businesses will start opening up again by June, and that by September, the economy will start feeling like it’s stabilizing again.
During that time, new homes might feel a little bit of a squeeze until homebuyer confidence fully returns. Interestingly enough, those who’ve already bought are not canceling contracts, and since demand is still pretty high, I would expect that here in Utah, the prices will be flat for the rest of 2020.
For these reasons, I feel that this is a home-buyers market. Of course, it’s not always easy to buy when things look bleak, but historically, this would be considered the idealistic buyers market, whether you’re looking to buy a house or more stocks.
Whatever you decide, I hope this article has been informative and helpful in your decisions.
Good luck and stay safe.