Real estate and Covid 19: A delicate balance

            As the real estate market struggles to fight initial pandemic effects, the future in late June has been clouded by an explosion of Covid 19 cases nearing daily figures approaching previous highs.

            That uncertainty will likely hang over both residential and commercial markets, even as historic low interest rates provide incentives for owning and investing in real estate while the larger economy remains fragile.

            In Oregon the pandemic has accentuated a long-recognized political and cultural divide between much of the I-5 corridor in the west that reaches from the Columbia River south through Portland and to  Eugene, and the many sparsely populated counties east of the Cascades.

            As state-mandated restaurant, bar, church and lodging closures and restrictions went into effect where case totals were rising, many eastern counties with few infections also had to shutdown businesses.

            In mid-June a backlash of elected officials in eastern counties manifested in a non-publicized meeting in Prairie City to air grievances and map a strategy to address restrictions emanating from Salem.

            But soon after the meeting case totals began to rise in the populous Portland metro and other western Oregon areas as well as central and eastern counties of the state. Nationally the daily totals of newly reported infections approached and surpassed those of previous peaks many weeks earlier.

            All the while as infectious disease experts warned of a continuing wave of cases, Trump administration officials on June 26 touted alleged “success” in getting back to normal. On the same day governors in Republican states of Florida and Texas announced new measures intended to head off increasing virus numbers.

            As Central Oregon including Deschutes County has “reopened,” so to speak, for the past weeks from mid-May, through Memorial Day and most of June, virus infections have slowly climbed, albeit at a level far below those of Portland and hotspot states and counties across the country. 
           By some reports, lodging occupancy in the Bend area has jumped from lows barely in double digits when stay-at-home was urged by health officials to more than 90% bookings going into the July 4 weekend--this in the face of city officials discouraging the influx of urban dwellers excaping to an area they consider safer. 
           But crowds in downtown Bend and floaters nearly bouncing off each other on the Deschutes River through town seemed to be signaling a trend in the opposite direction of staying close to home.

New case highs raise concern 

            The emerging new virus statistics could be a warning sign with more and more tourists and vacation homeowners coming into the area, and what in many public locations seems to be a silent (thus far) political conflict based on mask wearing and adequate social distancing.

            Armed with rising infection statistics, Gov. Kate Brown extended the state’s emergency declaration for 60 days, as of July 1, as the Oregon Health Authority initiated indoor mask requirements for the public and businesses.
            On June 30, Deschutes County reported its highest daily number of new Covid 19 cases in the pandemic, followed by the state which also reached a new daily record July 1. 
            The potential danger was highlighted July 3 in a Facebook post marked URGENT in red by St. Charles Health Sytem and noting that noted Covid 19 hospitalizations had almost doubled in 24 hours. The post warned that "if our behavior doesn't change we will overwhelm our health system's capacitiy in coming weeks."           

           Bend state Rep. Cheri Helt (R) has supported mask requirements, prompting comments from those who typically refer to wearers as “snowflakes,” and “sheepies,” often backing up their arguments with claims the virus is nothing more than the flu, or pleading their constitutional rights or difficult to verify health conditions that prevent them from masking.

            On Friday, June 26, the OHA released new statistics and three possible scenarios that all hinged on potential continued increases in the state’s infection rate. The most optimistic possibility, the OHA forecast suggests, would be slightly under 200 new cases daily with the most dire being more than 5,000 a day by the middle of July.

            A more moderate assumption would be just over 900 cases a day, bringing the total potential state infections to slightly more than 38,000 in mid-July, even so nearly five times the 7,818 confirmed cases reported by June 26.

The crowds return to the Deschutes R.

            At a July 1 news conference, Oregon's leading infectious disease expert said the recent jump in cases means the state could be facing, "a worst case scenario," and called the trend, "ominous."
            Officials announced that Deschutes has joined Umatilla and Malheur counties as having the greatest increase in cases. Statewide, Gov. Brown raised the possibility that rollbacks in business operations and plans for schools in the Fall could be possible if the public response in wearing masks and other measures is inadequate. 

 Brokers adapt business routines

             Although considered an essential business, real estate sales will be subject to restrictions on social distancing and masks. Brokers have already been charged with limiting visits at open houses and frequently disinfecting properties. Many have worked mostly virtually by handling necessary document production and signings online, and communicating face to face on Zoom and similar platforms.

            Through the first five months of 2020, including the period from mid-March as Oregon began its Covid 19 shutdown, sales of Bend single family homes on less than an acre totaled 753 at a median closing price of $460,000. That represented a decline of 4.56% from the 789 closings in the same period of 2019, but a 2.22% increase over the five-month median price of $450,000 the previous year.

The battle over masking on FB

            A consistent trend for 2020 and previous years has been the lack of inventory, as calculated by a 12-month moving average of sales. The homes on the market at the end of May 2020 represented a two-month supply, which ranged from a low of only 1.4 months in March to two months over the current year. Inventory also held at only two months for all but May of 2019, when it rose to three months.

Looking for wide open spaces

            Some brokers have concluded that the inventory has remained lower in part as sellers sit on the sidelines to wait out progression of the Covid 19 effects, coupled with continued demand from some buyers who are ready to either relocate permanently out of urban areas, or to have a getaway in a less populated area.

            Realtors in the Flathead area of northwest Montana--with such marquee natural attractions as Glacier National Park, the Bob Marshal Wilderness and abundant lakes and rivers--reports a significant spike in out of state buyers seeking some elbow room, and who are not sensitive to local prices.

            In comments reported by the Whitefish, MT based Flathead Beacon, Wendy brown of the Northwest Montana Association of Realtors said two trends are emerging.

            “People are really sick and tired of living on top of each other in the big city, and number two, everybody’s figured out how to work from home...So that’s probably our biggest driving factor—some of the barriers that kept people from being here before are no longer barriers.”

            Statistics from the NWMAR show 2,115 sales closed in May of this year, up from 1,921 the same month of 2019 and a rise in median single family home prices to $335,000, from $319,000 the previous year in Flathead County, nestled along Glacier National Park’s western boundary. Anecdotally buyers are coming from California, Washington, Oregon and Texas, local brokers report.

            Bozeman, MT based Fay Ranches, a leading ranch and land broker, has observed in its regular newsletter than ranches and land offer ideal opportunities for social distancing in the era of a pandemic.

            “It seems everyone is asking ‘where do I want my family to be when the next crisis hits”? Many people are considering land, which has caused a surge in the market,” according to Grey Fay of Fay Ranches, in an interview with The Land Report editor Eric O’Keefe.

            “From coast to coast it appears more people are recognizing land as the great insulator,” Fay observed in the interview.

            “As one client mentioned, ‘social distancing has been an attractive component of land for centuries. Right now, being in a place where the distance from your neighbor is measured in miles and not feet, sounds pretty good. I also wouldn’t be cooped up in this house all day.” according to Fay. 

Rental markets face potential defaults

            Apart from overall trends in residential and ranch real estate, the effects of Covid 19 appear to be hitting hard the rental markets in major metropolitan areas.

            Nationally, a Pulse survey by the U. S. Census Bureau, concludes that 27% of renters believe they will be unable to make their July rent payments. Miami leads the list of potential rental defaults with 49% potentially unable to make July payments, followed by Houston, Atlanta, New York and Detroit with more than a third in that position.

            In the Northwest Seattle renters in danger of rental arrears are estimated at 18%, or approximately 208,000 renters among 1.1 million in the metro area including King, Snohomish and Pierce Counties. San Francisco’s troubled rent segment of 19% is similar to Seattle.

            Earlier reports from major cities have predicted that many businesses wracked by Covid 19 related economic challenges are negotiating for lease relief by landlords or withholding

            In May Seattle-based Starbucks—with nearly 9,000 stores globally-informed its landlords in a letter from Chief Operating Officer Roz Brewer that, “Effective June 1 and for at least a period of 12 consecutive months, Starbucks will require concessions to support modified operations and adjustments to lease terms and base rent structures.”