I get asked how my real estate business is affected by the Coronavirus and the “Stay At Home” order. Here is what I see.
1. I was representing the seller in a sale that was scheduled to close by March 31, a few days into Inslee’s order. The buyer’s loan officer let me know that she had just checked to make sure her buyers were employed in an essential business. She expressed relief that they were. That one is now closed.
2. I also have a buyer whose purchase was supposed to close by the end of March. He got furloughed from his job a few days before the loan was scheduled to close. His employer’s office is still open but his work in the office can’t be done virtually or with six feet social distancing. His purchase is on hold. His lender tells us the day he is back in the office his loan can close.
But that has an issue. The close date for the purchase agreement has passed. Technically the deal is dead as we are still working with the seller on getting an extension of the closing date.
(About extensions. When your loan officer casually says, “We need an extension”, note that extensions are often granted but never guaranteed).
3. Another contract I had going when the Pandemic hit us failed to close because suddenly no one was buying that type of loan. So, two of the three transactions that I had in process when we entered the business shut down failed to close. I am grateful for the one that did!
I had two potential listings that are now on hold because of Coronavirus issues.
However, sellers are still listing properties. From last Monday to the present 71 homes got listed in the Northwest Multiple Listing Service. (NWMLS).
There are 336 active residential listings in Thurston County and 266 that sold in the last 30 days. We divide the active by the sold number to get the Months of Inventory (MOI). So today Thurston has 1.26 MOI. It had been around and below one month so is slightly increasing.
In the last 30 days 379 residential listings in Thurston County got moved to a pending status. How many of those will fail to close? Of course, we don’t know. But it is going way better than I thought it was going to.
I went through the Northwest Multiple Listing Service properties that became active in the last 30 days. I found 145 and checked for these numbers:
Price not changed: 119
Price dropped: 11
Price increased: 3
Pending back to active: 10
Pending to active twice: 2
We don’t see a lot of price dropping. Many homes are still being sold for above asking price. Right now, I have a buyer in Shelton and one in the Olympia area. In both cases we are still running into multiple offer situations.
We don’t see a lot of pending back to active. And even when they do they are not all because of the current crises. Pending can fall out of contract because of inspection issues as well as lending issues.
Bottom line is we still have a seller’s market. While there are both buyers and sellers who are taking a leave of absence there are still those that are looking to sell or buy homes.
What about lending?
I chatted with my mortgage broker friend, Ozell Jackson, at HomeBridge Financial Services. He reports there is a trend now toward higher credit scores and lower debt to income ratios. In the past it was possible to qualify with credit scores around 600. Now it looks like programs are requiring a minimum credit score around 640 to 660. In some cases, even higher.
Ozell added that if a buyer is not putting at least 20% down the loan will require mortgage insurance. The mortgage insurance companies are tightening up their guidelines as well. Also, the mortgage insurance is more expensive, especially with a credit score under 680.
This article from April 13 painted a bleak look for many buyers when Chase Bank changed its guidelines.
JPMorgan Chase, another of the nation’s largest mortgage lenders, changed its underwriting guidelines. As of this week, new mortgage applicants will need a minimum FICO credit score of 700 and will have to make at least a 20% down payment on the home…..Adding to the difficulty in originating mortgages for both new home purchases and refinances are changes to underwriting guidelines by Fannie Mae and Freddie Mac, who, along with Ginnie Mae, purchase the majority of mortgages today. They are requiring that all income and asset documentation for borrowers be dated within 60 days of the initial application, compared with the 120-day standard time frame…..For self-employed applicants, lenders must verify the existence of the borrower’s business within 120 days. That has now shrunk to just 10 days.
What will happen in the future? There are still a lot of unknowns about the Virus so we don’t know for sure what the economy and the housing market will be when “this is over”. There are also some unknowns about Washington State’s timeframe in getting us “back to normal”.
One thing I do know is that I am here to chat with you about real estate. If you have questions respond to the blog or feel free to call, text or email and I will give you frank, honest answers. And if you want to buy or sell a home…………we are considered an essential business!
Robert Elvin Real Estate broker at Sound Advantage Realty