How will Covid-19 affect the real estate industry

It depends on how long this lasts and the severity of the hit to the economy. Housing prices rise and fall much slower than the stock market but the fundamentals are the same, supply and demand. If there are more sellers than buyers, prices fall. If more buyers than sellers, prices rise. Right now, buyers are scared and that is going to but a big damper on the buyer pool but most sellers will choose to pause as well.

Part of the good news: we are starting from a low inventory market, which will give the system some slack to absorb the coming inventory.

This crisis could be different, at least initially because a lot of sellers will not put their house on the market until this blows over, which will keep inventory low. Therefore, even with a huge drop in fearful buyers, low inventory will keep prices from falling too fast. Think an extended January market. Its like 6 months of January, very few sellers, very few buyers, prices hold their own until the spring market hits and then prices rise as buyers need to outbid each other in order to win the house.

The problems will come if this is an extended winter when people start losing jobs and not being able to afford mortgage payments. Then we have a foreclosure crisis just like the housing crisis of 2006 -2010 over again. This starts at the bottom and eats its way up the housing chain to eventually affect the move up buyers and the luxury market.

The only way I see this not happening right now is if this is a short quarantine and everything gets back to normal fairly quickly and that doesn’t seem to be the case.

Initial reports from the National Association of Realtors show house showings to have dropped to levels similar to the 1st week of January, which is when only the people that really need a house are out shopping. That data was through March 17th. I would expect these numbers to continue or even drop to levels less than that. See the graph below, the axis on the left represents the percentage change in showings from the first week of January to the current week. See where the lines cross over, that is about March 12th when everything began to shut down. In a normal world, every week from Jan. 1 to the current week showings should increase until a peak around June. The good news is the showings aren’t less than January, yet, but we will watch that going forward. I think we could handle low showings but if that number gets under 0%, the market is shut down. Hopefully if it does shut down, its for a few weeks and then begins to rise. This will be an important statistic to watch.

The good news about the virus and real estate is how showings happen. Buyer and Seller don’t need to meet. An agent and the buyer can stay 6 feet away from each other. Other than the door knob, which could be sanitized, nothing needs to be touched. So, from a health stand point, there is no reason that a housing market couldn’t continue. Obviously, there are the financial concerns, but from a functionality standpoint, this can continue. There are virtual tours and video to cut down on showings until necessary. I was out yesterday looking at houses. The buyer rode in their own car and we were aware of our distance.

All that being said, as this goes on, houses will sell, buyers will buy, especially as we can see the end of the tunnel. Investors will step in looking for opportunity. Interest rates will most likely be the lowest they have ever been trying to generate opportunity for buyers, especially first time home buyers.

Obviously this is going to affect the housing industry. The Sellers who get hurt the most are ones that sell and don’t buy. It can be a great opportunity if you are selling and then buying a different house, but just make sure you can sell your house. And if you are buying and not selling, it can be a great opportunity. People always need a place to live, that will never change and there have been housing crises for as long as there has been real estate. In the late 70’s there was the interest rate crises when rates where almost 20% and sellers had to pay 25% points to a buyer to sell. The dot.com bust, the Great Recession. They are all a little different and we will watch how this one plays out.

Pre-MLS town house opportunity in Pineview Meadows - $174,500

Pre-mls opportunity to see 13848 Flay Ave N in Hugo before it hits the market at the end of the week. 2 bedroom, 2 bath unit on a quiet side street in the desirable Pineview Meadows neighborhood which is located just east of Highway 61. This complex is a little more off the path than the expansive Victor Gardens and Waters Edge so if you are looking for some peace and quiet this is for you. Contact me for a showing or more information - 612-202-4334 or brigg@briggbacker.com

Low radon levels in Hugo

Interesting information and map from a class given by Washington County. This shows the historical data from aggregated radon tests in Washington County. 4.0 p/Cl is considered the threshold for high levels of radon in a home, so if you are under 4.0, the house is considered to be safe and if a test comes back over 4.0 p/Cl the house is considered to have high radon levels and should consider installing a radon mitigation system.

As you can see, Hugo and Forest Lake generally have low levels of radon while areas in Southern Washington County and all along the St. Croix riverfront have generally high levels of radon. Houses can vary from one to the next as the radon levels are based on soil type and conditions but in general, homeowner’s in Hugo and Forest Lake have less to worry about in terms of radon.

The Preserve at Sunset Lake - new development in Hugo

New, proposed development in eastern Hugo and Mahtomedi Schools. This parcel is 137 acres with 13 proposed lots and shows how land can be developed at a smaller lot size than is allowed in the zoning code. These parcels are classified as rural residential according to the City zoning map, which is 1 parcel of land per 10 acres. As you can see, most of these lots are less than 10 acres. However, if you take the total acreage of 137 acres and divide by the number of platted lots (13), it works out to a density of 1 lot per 10 acres. The City allows this because it satisfies the density requirements per the zoning code. Additional land is set aside as an outlot or common space. All lots are required to have a minimum of 300 feet of road frontage either on the road and cul de sac that the developer is building or on 120th Street. Lot prices are from $250k - $379k with the builder Parent Custom Homes and sold by Edina Realty. The development has been approved by the City council.

Rice and Browns Creek Watershed changes in Hugo

Last week at the Hugo City Council meeting changes to the Browns Creek and Rice Creek Watershed dividing line were approved. See attached map. The areas in pink went from Browns Creek to Rice Creek and the areas in green went from Rice Creek to Browns Creek. I received a letter in the mail informing me of this action a few weeks ago and the whole thing smelled a bit fishy to me so I did some investigating. I was concerned that a large property holder was trying to reclassify their land to be more development friendly as the difference between the two watersheds is that Rice Creek doesn’t have buffer restrictions around delineated wetlands. So, that can be a big deal for someone trying to increase density.

I spoke to Rice Creek and Rachel Zuba at the City of Hugo and was told that it wasn’t a developer for a particular piece of land but that it was in response to a prior watershed delineation of the watershed line that was done incorrectly. They said that it was brought up by John Waller and the previous City of Hugo mayor Mike McCallister. I called Mike and spoke with him about it and it seemed like he was trying to set the record straight and that it wasn’t about any particular property being developed. His property was incorrectly classified and he was aware of this because he was mayor at the time of the previous survey and he wanted to set it straight.

My main concern was how Wild Wings game farm has now been reclassified as in the Rice Creek watershed district. They still need to adhere to current density and zoning requirements in the area, which is long term agricultural (10 acre min lot size) but the lack of a buffer requirement could really be advantageous for them if the decide to sell and develop (which I hear rumblings about).

My other concern with this process is how very few homeowners in the area were actually notified about the change. I was the only one of the immediate neighbors that I spoke with that received a letter about this. That’s what also made me a bit suspicious. The City of Hugo mentioned this as well. If this were a big concern or change to the area the local authorities need to follow protocols and notify all those affected.

Adelaide Landing Review - Hugo new construction

Adelaide Landing is a new contsruction development in southeastern Hugo just off of Highway 61 and 130th St. There are 3 builders involved, Creative homes, Derrick Custom Homes and M/I Homes building the villas. This will be a 4 phase developement that will most likely be selling for 3-4 years. Right now they are selling phase 1 and 2 which are the villas by M/I Homes priced starting at about $350,000 and Creative Homes and Derrick Custom Homes building the single family homes starting in the upper $400k’s on 65 and 85 foot lots.

One aspect of the development that is interesting is that the Mahtomedi and White Bear Lake School District line goes right through the middle of the development. It looks to me that about 1/3 of the single family homes will be in the Mahtomedi School District. I have spoken with the Mahtomedi School District superintendant about how this will affect open enrollment in the district as Mahtomedi is a highly desirable district. He has said that it will greatly affect the process and probably eliminate it. Right now it is extremely difficult to open enroll, especially after kindergarten and 1st grade and who do you think most of the buyers are going to be for two story 4 and 5 bedroom, 3,000 square foot homes….families. It will be interesting to see how Mahtomedi acclimates to adding a potential 40-50 homes and 100 kids to the district in the next couple years.

On the house side, I think the homes are great. Creative homes makes a solid home at an affordable price. The floor plans are open and materials and workmanship are very good. The price point is affordable for new construction. I am not as familiar with Derrick Custom Homes.

The streets are just recently in so you can start to get a feel for how the neighborhood will flow. The entrance is on 130th St and is going to move further east from the models once its more developed. Its not a huge parcel of land so the streets are stretched horizontally more than a boxey feel, which I think is a good thing. There are a lot of wetlands, which there always is in Hugo and we will have to see how they grow in and mesh with the neighborhood. They will use reclaimed storm water for irrigation.

https://www.creativehci.com/community/adelaide-landing/

New townhouse list in Pineview Meadows Hugo! $190k

Just listed this wonderful 3 bedroom, 3 bath end unit in the quaint townhouse complex of Pineview Meadows in eastern Hugo.  The complex is a mature, quiet area just of highway 61 south of downtown Hugo.  This end unit has 3 baths, including a master upstairs and 3 full bedrooms up as well.  The main level has an open feel with a gas fireplace and an updated kitchen.  There is an outdoor side area off the dining space for grilling and also a front porch for relaxing. 

Priced well at $190k.