Over the past couple of weeks I updated you on shelter-in-place orders in Austin and surrounding counties, and for all of Texas. (See Shelter in Place Orders in Central Texas and Covid-19 — New State-wide Order.) It appears that most or all of those local jurisdictions will announce new orders or extend existing orders beyond their current mid-April expirations. I’ll provide updates at they are available.
Today, though, I want to examine something I sensed recently in market activity — a sort of frantic buying spree that seemed to coincide with escalating concerns about the coronavirus Covid-19. I caution that this is just MLS data, and its meaning is probably not properly interpreted for another few weeks. Correlation is not the same thing as causation, and I don’t want to imply that I have overreached in reviewing this data.
For this discussion, I focused on the number of newly pending listings each day since January 1, 2020 — i.e., new contracts executed by buyers and sellers since then. Here’s a summary of the daily number of “new pendings” and their median time as active listings before purchase contracts were accepted, along with some of the major milestones in the development of the Covid-19 crisis:
Notice the contrast in these market metrics from January 1 through the first few days of February, and what followed that period. The number of new contracts began to decline about the time of the first reported Covid-19 death in China, but purchases continued and focused on listings that had been aging on the market. Whether that was because of the report from China, I suspect deeper analysis would show that bargain-hunting investors were well-represented in those transactions.
There is a brief transition in the Days On Market, roughly between February 4 and February 11, followed a few days later by a significant increase in contracting activity that tailed off around March 1. The most noticeable change, though, was the steep rise in activity on March 15 — two days after the United States declared the coronovirus a national emergency. After the first spike, that activity remained fairly steady, but you can see that the announcements of local emergencies in the Austin metro area complicated showing residential listings and made both buyers and sellers more conscious of potential risks of in-person interactions, hampering new sales from that point forward.
What market segments were most involved in this activity? This chart shows the same transactions as the graph above, but includes daily median of list prices of the listings just contracted (and the 7-day moving average of those unit volumes):
New contracts through January were dominated by older listings priced below the metro area median price, supporting my belief that investors were very active at that time. Of course, there were sales in all price ranges during that time, and some non-investor buyers who had been searching before the holiday season undoubtedly were part of that activity as well. In any case, the trend-line of those daily median prices goes from about $320,000 on January 1 to about $390,000 by April 5, making the market generally less attractive for single family home investors.
To avoid being myopic about this date, look at this 5-year history of monthly sales volumes and days on market:
In each of the last five years the ramp-up in sales in January, February, and March was steep, and looks a lot like what we saw in the first quarter of 2020. In fact, January 2020 was higher than each of the past 5 January’s, but unit sales in March 2020 were down compared to the same point 2018 and 2019. It’s also worth noting that a decline in median days on market during the 1st quarter hasn’t been unusal in recent years.
So … I find the apparent correlation between the U.S. emergency declaration and the spike in new contracting activity this year to be interesting, and it corresponds to what felt in my own listing and selling activity at that time. In “May you live in interesting times” — Covid-19 and a brief market update I discussed the fact that listing inventory in December, January, and February (2019-2020) was at its lowest point in the entire 7 years-plus long market boom that we’ve experienced. Competition among buyers for that very low inventory would almost certainly create a frenzy without the complication of the coronavirus, but the national emergency declaration may have concentrated that activity into a couple of weeks.
We’ll be better able to interpret this information after the crisis ends. One open question now is how much of that spike in March demand would have waited until April or later without the emergency declarations. Another very important question is what happen in April and beyond because of the crisis. An article in this morning’s Austin American-Statesman cites an economic analyst saying that more than 260,000 Austinites have lost their jobs in recent months. How long will that last, and how many of those folks would have been home buyers in the coming months?
There will be more to come, but I know there are would-be home sellers on the sidelines now and would-be buyers pre-approved and ready to buy. I believe we were on our way to another very busy year in Austin-area real estate and we should be still. There is no reason for that not to be true … whenever the Covid-19 problem is resolved. Time will tell.