Earlier in the week, I looked at how local media coverage has reported on COVID-19 and how it tends to prefer negative and sensational wording (not just in real estate coverage, of course). I ended by pointing to research that shows the media’s ability to push along a self-fulfilling prophecy – if they say it’s bad, it must be.
I’ve also pointed out many times that the nation, the state, and the city are behind in residential housing construction. It is the key ingredient of Dallas’ housing price gains.
So as we struggle with the effects of COVID-19, what real estate decisions should I make? I’d say exactly the same ones you were going to make if it wasn’t – if you can.
Weights on the Market
With underlying metrics so good, what can produce market drag?
Unemployment is by far the biggest wild card. There are the usual questions about how long it will last and when the economy will return to normal-ish. We can’t know that.
But this large pool can be broken into parts concerning real estate. Regardless of employment status, we all fall into four real estate buckets – owners, renters, Chez Parents, and homeless. The question of how unemployment unfolds impacts the ratios of each bucket.
Without robust savings, the longer one is unemployed, the further down you go. Owners and renters return home or in extreme circumstances become homeless. I have walked miles in these shoes though various recessions but have managed to avoid homelessness.
Waiting for a Bargain – Good Luck
The other drag will be people waiting for a real estate crash to nab a bargain. I suspect bargains will be relatively few because of the underlying metrics. Barring intervention, at some point, prolonged unemployment will push up foreclosure and vacancy rates which will push down prices.
At that point investors will storm in and buy, removing for-sale inventory from the market. Interventions can be government-backed or bank-programs. I assume banks recall the devastation they wrought and suffered through in the last Recession – which may assign too much humanity to banks.
But knowing when to pounce is always fraught (unless you have a little intel). I will remind that there’s not enough housing already and a prolonged downturn would slow construction, which would probably give Dallas a bigger bounce than it’s had since 2012 (Dallas home prices have surpassed their 2008 peak by 75 percent – and that was after a housing glut).
In the rental world, now is also a good time to be negotiating – especially with new projects that are still trying to get their first butts in beds. As leases renew in the coming months, it’s worth paying attention to specials.
What we can’t know is how long this will last. Weeks? Months? We also don’t know the full extent of any government or bank assistance and its effects, because that last check hasn’t been written.
Waiting for the All Clear
Don’t. Just minimize your risks. Let’s look at some numbers – and because we’re talking about people, it might seem ghoulish.
According to a New York Times analysis, on May 9, Texas had 1,332 cases of COVID-19 reported in long-term care facilities and 478 deaths. This was 43 percent of the state’s death toll. Of those 1,332 statewide cases, Dallas County accounted for 358 or 27 percent. However, Dallas County is just 9 percent of the Texas population. This confirms what we already know. COVID-19 is far more lethal for older people with a special hotspot in nursing homes.
Nursing home residents are outside the real estate market being neither buyers nor sellers – making them also unable to transmit the virus to homebuyers (unless a buyer/seller works at the nursing home).
Nursing homes are hotbeds in part because of what’s known as household density – lots of people in a home – versus municipal density – lots of people in a city. Lots of people in a home is a bigger factor than municipal density. If urban density was the culprit, hyperdense cities in Asia wouldn’t have been able to control their outbreaks.
Uncomfortable Truth: COVID-19 Follows Redline Maps
In the US, ethnicity plays several roles in likelihood of contagion (because, of course).
Economically, whites live in homes with fewer people – be they children, grandparents, etc. Whites are also more likely to work a single job with health insurance, paid sick leave, and less interaction. People of color are far more apt to live in an opposing state that encourages close quarters — even when sick.
The New York Times noted that the prevalence of COVID-19 followed the city’s segregation-era redline maps and not municipal density maps. This is not far removed from Dallas County, where just 9 percent of reported cases were white, but where whites are 42 percent of the population.
This is all to say that in whiter, more prosperous Dallas, touring homes poses much less danger. Again, not a surprise if you’ve followed the news (and definitely uncomfortable to report).
Municipal density, covering things like condos and apartments, doesn’t equate to higher rates of contagion.
I’ve heard anecdotally that since stay-at-home orders have eased, condo and apartment showings are slower than single-family homes. Commenters of the earlier story noted that new homes appear to be more popular than existing homes because of transmission concerns. Buyers and renters are similarly concerned that high-rises are incubators.
This is untrue.
The vast majority of condos and apartments are populated by one or two people – regardless of the size of the unit. My floor at the Athena had eight units comprising 20 bedrooms and just nine full-time residents. At the Claridge it’s five units, 14 bedrooms and six people. High-rises might have a lot of units, but they’re less crowded than most single-family homes.
Add in air circulation, cleaning crews constantly disinfecting surfaces and doorknobs coupled with elevators that are typically empty, and transmission potential is equally minimal. Feel free to look.
Heading for the Country
Again, municipal density isn’t necessarily a driver of contagion, household density is.
Those now fearing an urban life is a life cut short must think again. Urban areas have a higher life expectancy than rural areas. Looking at the map above, you can see the darker areas are where people live longest in Texas – they’re the counties encompassing our largest cities. The highest life expectancy in the state is Collin County where I’d live a few months longer than Dallas County (but I’d be bored out of my skull).
The only reason I can see to hold off buying or renting is income stability. And it’s a very real concern. But if you’re waiting for some sign from above, don’t. The COVID-19 Quarantine Economy isn’t the Housing Recession. There is no glut to work through. At best there is a slowly creeping shortfall, at worst a “tens of thousands” home shortage becomes a 100,000 home shortage – and you don’t want to be buying or renting if that happens.