Everyday, we learn something new about the impact of the COVID-19 virus on our economy and our daily lives. In previous newsletters, we discussed that despite the slowdown in real estate transactions, market fundamentals remain good. In addition, we put forth the opinion that the real estate market would rebound much like it did post 9/11. Even though our real estate market is still impacted by the virus due to the prohibition of vacation rentals, which reduces the number of real estate showings, we are starting to see some improvement in the market.
The graph below compares the number of contracts signed per day during 2019 and 2020. Contract signings, also known as pended contracts, were analyzed as it provides the most real-time indicator of market activity. In addition, since day to day numbers can have large variability due to day of the week, weather, etc., a seven day moving average was used for the period ranging from March 1st to May 10th. This comparison provides some insight into the impact of the Coronavirus over the last two months.
As the graph indicates, by March 1st the impact of the virus was already being felt. Not shown on the graph was an increase in market activity during January and February. The market slowdown started to gain traction on March 16th, when President Trump issued guidelines to help slow the spread of the virus such as closing schools, avoiding groups of more than 10 people, reducing discretionary travel, and recommending other limitations for bars, restaurants and food courts. This decline in activity continued until April 2nd when the number of pended contracts started to grow, reducing the difference between 2019 and 2020 sales activity.
The downward trend reversed even though the Governor of Florida issued a stay-at-home order on April 1st. So,what’s significant about April 2nd? Here are some theories:
People started to get over the shock of suddenly needing to stay at home working, children receiving online instruction, etc. A new normal was settling into life, making it possible to think about real estate again, even second home real estate.
The restriction on vacation rentals prevented individuals and families from taking their normal spring break vacations and planning summer vacations whether they were on the Emerald Coast or somewhere else. As a result, those that could afford second homes but did not own one, suddenly wished they owned a place to “shelter-in-place” that was more enjoyable. In other words, “If I’m going to be quarantined, it might as well be at the beach.” Anecdotally, we know that this occurred to some degree.
Like the post 9/11 environment, people had the desire and saw the benefit of having a vacation home that did not require an airline flight or a multiple day drive. A place that you could get to if you decided that morning to take a trip. Again, we know of cases where buyers had been looking at property in the Bahamas but became interested in the Emerald Coast due to the ease of getting to our area.
The above list is not an exhaustive list of reasons but it captures the overall market sentiment. As the chart indicates, market activity continues to grow, despite the vacation rental ban, and is almost back to 2019 levels. As a result, we expect that trend to continue as Florida continues its phased approach to reopening.
In summary, market fundamentals remain strong, transaction volume is returning to normal levels and the number of property showings, taking the appropriate safety measures, is increasing. Your real estate agent is your local guide and advocate for the Emerald Coast. As a result, they are a wonderful resource for you regarding our beautiful region. We are here to help!