Are Home Prices in Massachusetts Going to Drop?

Is the Housing Market Going to Crash?

This is the big question everyone wants to know. I think it's likely that home values will go down or at the very least stabilize but it's too early to tell for certain. Real estate agents want to remain optimistic and encourage sales but you also have to look at the reality of the situation.

*Please note that I am not a financial advisor nor an economist. These are my observations and opinions.

Let’s play out two different real estate scenarios

First let’s assume this is just a temporary blip in the radar and when the imminent threat of COVID-19 goes away life returns to normal. People return to their jobs and everyone resumes spending like they did previously. 

This could increase the demand for real estate even more. We were already in a strong seller’s market, if buyer’s are holding off right now and they resume their search, say, this summer that could drive up the competition and home prices even more. 

If lots of homeowners suddenly start selling we could see a more balanced market as there is more supply to meet the demand. If interest rates remain low buyer’s will certainly want to take advantage of that. If rates go up buyer’s might hold off.

Now let’s talk about what could happen if COVID-19 drags on for months and people are out of work for a longer period of time. I think this is the most likely scenario. When someone is making less money their tendency is to cut back on their spending. 

That could mean less vacations, eating out, clothing, personal care, new cars, etc. Our economy relies on people spending money. When they stop spending we see economic contraction. 

If people are out of work for an extended period of time we could see business closures, foreclosures, and a drop in home prices. I’ve already seen some panic price drops with homes currently on the market. That's not to say that the value of these homes went down immediately but rather that sellers are scared of the instability and they’re also afraid that if they don’t sell now their home will drastically decrease in value. Whether or not this actually happens remains to be seen.

There were 579 homes withdrawn from the MA market in the past 2 weeks with 3,123 homes that went under agreement/contract in that same time. There were 1,263 homes were listed in MA in the past two weeks. Closings are still happening and we're getting creative with the logistics to protect our clients. Moving companies are also considered essential personnel. 

What can you do right now to protect yourself?

If you're buying:

Get pre-approved and stick to virtual tours. Only see homes in person that you are seriously interested in. Make sure you have at least 6 months worth of savings in addition to your down payment and closing costs. Real estate agents now have access to COVID-19 contingencies that protect your interests if there are delays or if you can no longer move forward with the purchase.  

Consider your goals in home buying as well. If you're planning on moving in 2-5 years, now might not be the best time to buy. If you're buying your forever home and you're in a good financial position I would feel comfortable buying. Your home may temporarily drop in value but they do go up over time long term. 

If you're selling:

Consider waiting until the stay at home order is lifted. If you list now you're not exposing your home to the biggest pool of buyers. If you must sell I would make sure that your home has a virtual Matterport tour and I would do a virtual open house. High quality professional photos are a must.

Limit showings to seriously interested buyers and disinfect all surfaces and doorknobs before and after each showing. 

Most real estate agents aren't tech savvy so make sure you choose someone who knows how to market your property virtually and how to utilize social media.

If you were thinking about selling in the next 1-5 years I would talk to a real estate agent (like me!) and create a game plan now. If your home drops 10-30% in value will you still be able to sell at a profit? Can you put off moving until the market recovers? Do you need to sell right now? (Job loss, transfer, family changes) If your home does drop significantly in value and you must move can you rent out that house while you're purchasing another?

This is surely a difficult and confusing time and there's no way to know exactly how this will all play out. Make good decisions based on fact not fear and you'll set yourself up for the greatest change of success. 

I'm always here to talk about your options or if you have any questions/fears.

You can also follow my Instagram account @athomewitherica for the most up to date information.