6 ways to determine pre-COVID-19 versus post-COVID-19 real estate pricing

As the states begin lifting stay-at-home orders, how will prices from the pre-COVID-19 market compare to those post-COVID-19 market? More importantly, how can you determine exactly how much prices are changing in your local market? 

Supply and demand drives price. Plain and simple. At least in NYC, the stats showed a shift from a buyer's market to seller's market. This doesn't mean demand went down. This is simply because supply decreased. So this has everyone asking whether the factors below will drive the post-COVID-19 market into a full-blown downturn. 

• Increased unemployment, divorce, business losses or people being forced to downsize due to loss of income.  
• Lack of jumbo financing, especially if this situation continues for any length of time.  
• A much smaller foreign buyer market due to border closings, international lockdowns, economic losses and limited legal immigration to the U.S. 
• An increased number of distressed property owners  (which could be mitigated if a large percentage of consumers take advantage of lender forbearance programs.) 
• Investors liquidating properties due to nonpayment of rents coupled with “do not evict” orders.

I predict that many cities will experience a "re-setting" of prices, but we won't really know the impact of COVID-19 until we start to see actual closings for contracts that were signed during the quarantine.

So here are the 6 steps to determining the pricing strategy for your home. Remember, especially in NYC, every neighborhood, block, even the building are considered a sub-market, so use these tips accordingly.

1) Determine pre-COVID-19 prices based upon the date your area went under quarantine or lockdown. (Run the search for sales that closed Dec 15 - March 15)

2) Run a search for active listings that are MOST comparable to your listing for which you you are trying to predict pricing.

3) Determine pre-COVID-19 monthly inventory. For example if inventory before quarantine was at 3 months and now it's 6 months, this means the pricing curve has flattened and the seller’s market with peak prices is history. If the inventory continues to grow, price declines are on the horizon. For sellers, unless you don't really need to sell, just want to test the market, or want to chase the market down, it’s extremely important that you price your property right at or slightly below the comparable sales (both active listings and sold listings).

4) If you can compare price per square foot, this is a very easy calculation to get. Determine pre-COVID-19 PPSF and compare it to during or after-COVID-19 PPSF. If the number appears to be going down then adjust your price accordingly.

5) Look at the cost of carrying the home. For example, say your property value has already fallen by $25,000. Your mortgage payment, taxes, and insurance are about $4,000 per month. To calculate your true holding costs, you must add the amount your home declined plus your monthly carrying costs for each month you continue to hold the property. The cost to carry the home could end up costing you more than any price adjustments over time.  

6) DON'T RELY ON ZILLOW OR ANOTHER ESTIMATION TOOL TO PRICE YOUR HOME! These sites do not calculate upgrades, seller motivation or other important factors let alone the impact of the quarantine. For example, one Zestimate I heard about increased in the last 2 months, and the only reason I could determine is because there were fewer active listings, so the average prices adjusted accordingly. I wish it was that easy.

If you have any questions about buying or selling, in New York City or anywhere in the world, please schedule a complimentary 15 minute consultation with me!

Karen Stone | 917-858-1261 | [email protected]