It’s been roughly two months since the effects of  COVID-19 virus began in our area and our real estate market. In those two months, much has changed.  Stay-at-home orders have given way to the resumption of normal beach vacations.  Visiting restaurants, retail stores and even bowling alleys are now possible.  The real estate market has changed as well.  Thankfully, it is progressing as we anticipated back in March.  It’s great news for all of us who love the Emerald Coast.

Back in March when COVID was dramatically impacting the stock market and the level of real estate activity, we made the case this market slowdown was different than those in the past.  Real estate market fundamentals are and were stable, strong and more resilient.  Our opinion then was the market would behave much like it did after 9/11.  In March we stated,

“The lingering psychological effects of 9/11 on the consumer led many to look for “safe havens” to invest their money and spend their time.  Many people avoided air travel and larger populated areas for years after.  This resulted in drive-to destinations and markets with strong regional consumer bases experiencing a spike in demand.”

The question we could not answer then was when would this increase in demand occur?  In a subsequent article in May, we wrote that it appeared the market was behaving as we predicted.  Around April 1st, the downward trend began to reverse with the number of real estate contracts being signed (pended contracts) increasing.  Below is the graph (Figure 1) from that article comparing 2019 and 2020 pended contracts where the increase from April 1st through May 10th can be seen.  All of the presented data is from the market areas in which The Premier Property Group operates.

June 2020 Newsletter-Market Update-Figure Graph 1 

The trend looked promising and we stated that transactions were returning to normal levels.  Following is the same graph (Figure 2), updated through June 5th, 2020.

June 2020 Newsletter-Market Update-Figure Graph 2

The change is striking.  As the COVID-19 related restrictions that kept visitors and buyers away from the Emerald Coast were slowly lifted, the number of pended contracts increased dramatically.  This mimics the comments from Premier Property Group agents that they are busier than ever.  At this point, a few questions should be asked: 

1)    Where does the market stand year-to-date?  Have the declines experienced during March and April been reclaimed?

2)    How have values fared during this period?

3)    Is the increase in transactions during May and June the result of pent-up demand or is it real market growth?

Let’s go through each of these

1)             Where does the market stand year-to-date?  Have the declines experienced during March and April been reclaimed?

Following are two graphs (Figure 3 and Figure 4) that help show where the market stands.  Figure 3 shows the cumulative number of pended contracts for 2019 and 2020.  The teal line and the orange line represent 2019 and 2020, respectively.  This year started promisingly with total pended contracts higher than 2019 until March 11th when the effects of the COVID-19 slowdown overcame the year-to-date gains.

June 2020 Newsletter - Market Update - Graph 3

From a pure number of contracts signed, 2020 is still slightly behind 2019 by approximately 5%.  Looking at the trends; however, it seems as though the gap will be closed by the end of June.  

From a volume (contracted price) standpoint, the news is even better with the gap being completely closed and total pended volume year-to-date for 2020 higher than 2019 and can be seen in the below graph (Figure 4).  This graph is the same as the one above but for cumulative contract values rather than number of contracts.  Note 2020 volume was greater than 2019 volume until March 24th.  We will come back to that date later.

June 2020 Newsletter - Market Update - Graph 4

While contract signings are great, what about closed real estate transactions?  Figure 5 below is similar to Figure 4 but for cumulative volume of closings rather than cumulative pendings.  Keep in mind that the average time from pended contract to closed contract is around 40-45 days.  As a result, the lag between the chart above and the chart below is a little over a month.

 June 2020 Newsletter - Market Update - Graph 5

This year was performing well from a volume standpoint at the start of the year with 2020 volume outpacing 2019 volume.  Around March 20th however, the impact of COVID virus can start to be seen.  It’s subtle but the consistent year over year growth starts to decline; the impact of the reduced number of pended contracts starting to be felt and closings being delayed due to a variety of reasons, namely stay-at-home orders.  Starting in early May, total volume for 2019 and 2020 are relatively equal.  By early June though, 2019 volume is higher than 2020.  The good news is this was predictable from looking at the cumulative pended contracts graph. 

Remember the March 24th date in Figure 4 when cumulative pended volume for 2019 became higher than 2020?  Adding 45 days to that date puts you in early May, just when 2019 and 2020 sold volume is relatively equal for the first time all year (Figure 5).  Pended volume (Figure 4) in 2020 starts to eclipse 2019 volume again in late May.  As a result and assuming a 45 day contract to close period, cumulative sold volume for 2020 should start to be higher than 2019 again sometime in late June, early July.

Most of the first quarter market reports for the area from area brokerages bragged about how first quarter sold volume in 2020 was higher than the same period in 2019.  While this was true, they forgot to write about the real headline; the upcoming impact of COVID-19 on the market.  

2)             How have values fared during this period? 

While COVID-19 has had an impact on the number of transactions, it has not had an impact on average prices.  As the chart (Figure 6) below indicates, the average contracted price for each month in 2020 is higher than the corresponding month in 2019.  While June is not shown on the below graph, preliminary data shows this trend continuing. 

Also of note is the year of year growth for each month is increasing, ranging from 1% growth in January to 19.7% growth in May. While some of this increase is due to true price growth, we also believe this is due to a disproportionate increase in the number of transactions at higher price points.

June 2020 Newsletter - Market Update - Graph 6

3)             Is the increase in transactions during May and June, the result of pent-up demand or is it real market growth? 

Based on conversations with agents and buyers, the answer is both.  The extent of each is not clear yet.  Agents state they have buyers who were waiting for short-term rentals to open back up before they purchased real estate and agents also say they have buyers that had been looking elsewhere but chose to buy here for many of the same reasons we stated in March and earlier in this article.  People want to own second home property in “safe haven” areas that could be reached quickly.  This could be buyers who could afford vacation homes but chose to rent are now buying property or buyers previously looking in Europe, the Carribean or other fly-to markets are now looking for property on the Emerald Coast.  This increase in demand could also be why the year over year price growth is increasing each month. 

In summary, the market is behaving much like we said it would back in March.  The market is performing remarkably well and we expect the trend to continue through the summer.  This of course assumes the restrictions previously put in place due to COVID-19 continue to be relaxed and there is no second wave of restrictions put in place.  In either case, the market continues to be robust, healthy and active.  If you have any question about real estate properties, our market or anything else related to the Emerald Coast, please feel free to reach out to a Premier Property Group agent.  They are your advocate and are ready to help.



Posted by Alyssa Walker on
Email Send a link to post via Email

Leave A Comment

Please note that your email address is kept private upon posting.