The Missouri real estate market was expected to have a promising year, but it’s since been hobbled by the COVID-19 pandemic according to initial home sales numbers. And the disruption may stretch into the fall according to the Missouri Realtors Association, even as the state moves to loosen up its stay-at-home order in May.
Home sales were down almost 20% in March compared to the previous year, and the number of March’s new home listings was down almost 12%, according to a Missouri Realtors report.
“The spring market was pretty strong,”, Missouri Realtors CEO John Sebree, said. “But March home sales were down 19.4% year-over-year, so March 2020 had almost 20% fewer sales than March 2019.”
It’s a significant number, he added.
The stay-at-home order for Missouri to combat the spread of COVID-19 was issued April 3 and went into effect April 6, and so the full impact of the pandemic on Missouri’s housing market won’t be known until more home-sales data becomes available.
But according to Sebree, the early indication is that the market has already slumped and could possibly stay that way for months – even in a best-case scenario..
“It takes a while – you put something on the market and even if multiple offers come in quickly there is still going to be lag time,” he said. “I think we’re going to see that, from a closing perspective, June and potentially July [numbers are] still going to be pretty far down over previous years.”
Best case, Sebree added, if the state opens up in May and people are confident in their safety and have the money to purchase homes, the housing market may see a large rebound in sales numbers in September or October as things get back to normal.
In Columbia, according to a Columbia Board of Realtors report, the city was also seeing a positive first quarter for home sales; Home sales were up 17.5% for March compared to the previous year.
Yet new home listings were down 50%, likely indicating that Columbia will also see the same sharp decline in home sales as more numbers become available.
“With the virus, it really didn’t hit home until about the first of April,” Chris Martin, president of the board of directors for the Columbia Board of Realtors, said. “You have to realize there is always lag time when it comes to sales, so a lot of things that were under contract in mid-January all the way through February were a lot of the closings we are seeing in March.”
People simply aren’t putting their homes up for sale unless absolutely necessary, for two main reasons, he said.
“One is obviously the health reason, we can give all the advice for sellers in this kind of situation, but you’re still letting complete strangers come through your home,” he said. “The other is the economic side of things, we have a lot of people being laid off.”
The economic uncertainty has resulted in some individuals simply waiting out the pandemic by pulling homes off the market, and some potential buyers being financially impacted because of layoffs or as the result of tightening lending requirements, according to a poll provided by the Missouri Realtors.
Of about 600 realtors who attended an April virtual conference, 52% reported they had sellers remove homes from the marketplace. And about 60% percent of the realtors reported having lost sales or had sales significantly impacted due to the virus – especially “due to job loss or financing issues.”
“I have lost several contracts due to job losses,” one agent reported.
“Seller completely backed out of a contract due to uncertainty,” reported another.
A housing market already contracting due to the pandemic may feel the additional pinch as lenders begin to change their lending requirements, some realtors indicated in the poll.
“Fear, job loss, and difficulty with financing – and more to come with the raising of minimum credit scores,” another realtor indicated.
While interest rates have remained low, government loans such as through the Federal Housing Authority have seen an increase in credit requirements to minimum credit score of 680 in April. Meanwhile, private lenders such as JP Morgan Chase have increased their credit score requirements to 700. The move is undoubtedly edging out some individuals who were in the market to buy homes, as indicated in the Missouri Realtors poll.
“With increasing credit scores to qualify, there will be less buyers with the ability to purchase,” reported another realtor.
Simply put, the market is experiencing significant uncertainty due to the pandemic and subsequent worker layoffs.
“There is so much uncertainty, even as governments encourage people to get back to work there are going to be a number of people who say ‘it’s still a little too early’ or that homeowner who might say ‘I’m still not ready for masses to be traipsing through my home, we need a little more time,’” Sebree said.
Yet despite the uncertainty in the market, Sebree remains positive that it will eventually right itself, even if it takes a while.
“[The process] will be slow and steady,” he said.