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Real Estate News

Market Metrics: The COVID-19 Impact on Northern Virginia Real Estate

05/31/2020

An Evolving Picture

Editor’s note: This article was written during the third week of April, 2020. Due to rapidly changing circumstances surrounding the COVID-19 pandemic, data trendlines included here may have shifted prior to the publication date.

PRIOR TO THE COVID-19 PANDEMIC, a typical Market Metrics article for RE+View included information based on the most recently available data, which usually described some measure of economic or real estate market performance one to three months prior to the time the article was written.

The data may have represented conditions that occurred four months before it is published. But that was in “normal” times. And even when the real estate market was overheated, or when the velocity of the market slowed to a crawl because of an economic downturn, we could anticipate the value of most data points by simply looking at recent data trends. Then came COVID-19.

Table 1

Date	Action (selected)
March 12	State of Emergency declared, ban travel for state employees, ban large state government events, localities urged to ban large government events
March 13	Public K-12 schools closed for two weeks
March 17	10-person limit for restaurants, theaters, fitness centers, essential services exempted, prohibit new eviction cases, ease rules and expand eligibility for unemployment benefits, suggest self-quarantine for vulnerable population
March 24	Public K-12 closed for remainder of academic year, ban all gatherings of more than 10 persons except for essential services, delivery and take-out only for restaurants, non-essential retail closed for 30 days
March 30	Public colleges/universities online only, stay at home order through June 10 except for medical, work, family care, groceries, pharmacies and similar trips.
April 8	Primary elections moved from June 9 to June 23

*Announced or effective date. Source: Governor's office.

To illustrate the speed at which dramatic changes in the way we live and transact business have occurred, and to provide context for the market data presented here, Table 1 offers a brief synopsis of key executive decisions in Virginia related to COVID-19.

The American public largely remained unaffected by the emerging pandemic until mid-March. When state leaders and businesses began to limit travel and alter business operations in the leisure and hospitality, transportation, and retail sectors, the displacement of service industry jobs skyrocketed.

Figure 1: Weekly Initial Claims for Unemployment Benefits (seasonally adjusted)

Source: Employment and Training Administration, US Department of Labor

Figure 1 shows the number of national weekly initial claims to state unemployment insurance programs. The data series goes back to the first week of 2007. The week ending March 14, 2020 saw total initial claims for unemployment drop to 282,000 – a small decrease from the previous week continuing a long-run strengthening of the job market since the Great Recession. Just one week later, total weekly claims exploded to 3.3 million, which was a record level that represented more than a 1,000% increase over the previous week. The next week, initial unemployment claims doubled again to 6.6 million, and while the pace of job loss abated slightly in the week ending April 11, to 5.2 million, this still meant that over a three-week period the U.S. shed almost 19 million jobs.

To put this in context, the worst week of the Great Recession for initial claims for unemployment benefits was the week ending March 28, 2009 with 661,000 claims – one-tenth of the level seen in the last week of March 2020. As the job impacts spread beyond the public-facing service industries into manufacturers and professional services that supply the sectors first impacted, the number of lost jobs will continue to accelerate. The duration and magnitude of the economic shock caused by the COVID-19 pandemic is unknowable at this point. There are simply too many variables to consider. Even with this limitation, it is important to at least keep track of available data related to the business of real estate.

There is little widely available real-time data on real estate markets that Realtors® can use to guide client decision-making and to plan business activities and outlooks. Moreover, the economic data on jobs, payrolls, and consumer confidence that underpin so much of the real estate business will not really show up for several weeks. However, there are some data that allow us to get a sense of what is market data as it becomes available. See the end of this article for more information.

MARKET INERTIA

There are certain elements of the real estate business that exhibit substantial inertia. As shown in Figure 2 and Figure 3, the number of properties going under contract and the number of closed properties have essentially tracked with usual seasonal patterns. The lack of an impact of the increasing restrictions on business and personal activities in the last half of March 2020 is likely due to these data points reflecting market processes that began in January and February, when the pandemic was seemingly limited to other countries. However, there is a critically important conclusion that can be drawn from these data.

Figure 2