The COVID-19 pandemic has had, and will continue to have, a major impact on Boston's real estate market. Many different factors are at play. Most of the effects are having negative impacts on the market, such as increased unemployment in certain industries, slowed/stopped construction and widespread uncertainty about how much damage the pandemic will inflict on the economy and how long it will list. However, there are also a few side effects having a positive impact, such as the lowering of interest rates.
The impact of this pandemic is only just starting to be felt. Looking at Boston's condo market, in the first quarter of this year, we actually saw more closed sales and more condos go under agreement this year than last year. However, we saw fewer listings come on the market.
While the first confirmed case of COVID-19 in Boston was made on February 1st, many of the office/business closures and government-ordered restrictions did not come into place until March. In the beginning of March, in fact, the Boston condo market seemed to be performing very well and we actually saw more new listings come on the market than over the same period year. However, that quickly changed.
Looking at some major milestones in the month of March (see chart below), we get a better picture behind the slow-down.
Currently, open houses are essentially prohibited due to the restrictions against public gatherings. Showings in and of themselves are also challenging, if not impossible, given the circumstances. Based on the slow down of new listings, and the challenges involved with showing the units there are on the market, we expect that the number of new units that go under agreement and the number of closed sales in the second quarter of the year to be lower than in last year's second quarter.
It is too early to tell though where we will see sale prices trend. Certainly, as mentioned above, there are negative effects on the real estate market due to the epidemic, including that many businesses are closed which has severely increased the unemployment rate and forced others to accept pay decreases; the stock market has gone down substantially and some people that may have had their "down payment" funds in stocks saw those funds shrink; and there is continued uncertainty about the impact this pandemic will have on the economy and for how long.
However, certain effects are pushing in the opposite direction. For instance, interest rates are extremely low, which presents favorable financing opportunities; while it is only temporary, the construction work-stoppages are further slowing the delivery of much needed additional supply of housing units; and some of the industries that comprise Boston's workforce may not be impacted as greatly by job and profit losses, which may insulate Boston more than some other parts of the country, as the medical, pharmaceutical, biotech and technology industries are all being called upon to help steer us through this pandemic.
It is also too early to tell what the second half to the year will bring. We have clients that were planning to bring their properties to market this Spring, but have decided to hold off until the COVID-19 concerns subside. We may see volume in the Summer and Fall this year turn out to be higher than in years past.
As always, we will continue to watch and monitor the market. Please reach out to us with any questions you may have on the market or if you have a property you plan to sell and want to discuss timing strategy.