Up North Real Estate After the Lockdown

What the pandemic has done to the region’s market, the new approach to selling — and how buyers might ultimately benefit.

By Ross Boissoneau | May 2, 2020

At the beginning of the year, the real estate industry looked poised for a very good, potentially great year. Interest rates were low, the economy was strong, there was interest in buying and selling — the only cloud on the horizon was the low inventory of homes for sale. Even the construction industry, which had been unable to keep up with demand since the recession ended, was making headway.
 
And for two, two-and-a-half months, that was the way it worked. “Inventory was tight, [but] we were doing fine,” said Pat O’Brien, owner and broker at Pat O’Brien & Associates Real Estate in Boyne City. “A lot of stuff sold as soon as it was listed.”
 
“It was really good across the board,” said Amy Wagner of Coldwell Banker Schmidt in Cadillac.
 
“Everything was strong: Commercial, residential, all price points. Everything was great,” echoed Wally Kidd of Kidd & Leavy Real Estate in Boyne City and Petoskey.
 
First-quarter statistics back that up. For the five counties served by the Traverse Area Association of Realtors, there were 582 sales, besting the record of 567 sold in January through March of 2017. The dollar volume of $163,397,361 outstripped 2018’s record high by almost $20 million.
 
The low inventory and continued push for both primary and second homes made it a seller’s market.

AND THEN …
Now the question is whether there’s a market at all.
 
As the pandemic took hold in the United States, signs of softening price growth and slower buyer activity began to emerge in the last two weeks of March, according to Realtor.com. Nationally, the number of homes for sale declined 15.7 percent year-over-year. Businesses closed and the economy shut down.
 
“Mortgage applications have fallen for five straight weeks. Home starts are down 22 percent. We have a very challenging year ahead of us,” said Randy Dye, a longtime real estate veteran who has his own brokerage in Beulah.
 
Even when things open up, he’s not sure it will make an immediate difference, given the financial downturn and an anticipated cautious reaction. “There’s not a switch. People have lost money in the stock market.”
 
HOW AGENCIES ARE PIVOTING
Rather than getting caught off-guard and standing idly by waiting for normalcy to return, many are leaning hard on technology, something proving to be a lifeline in this highly unusual business environment.

“I’m thankful we’ve been getting ready and are able to operate without stopping our business,” said Tracy Bacigalupi, president of marketing for the Coldwell Banker Schmidt Family of Companies.
 
Tom Gray, the company’s COO and president of its northern region, said, in effect, the industry has spent the last two decades getting ready for just this sort of situation. With cell phones and the internet enabling email, virtual tours, and electronic signatures for closings, most Realtors still have the ability to do business.
“It wouldn’t have happened if not for the progress in the last 20 years,” he said. “It was an unfortunate event, but it allowed us to push our agents into the 21st century.”
 
That push includes providing information and education for both sales agents and the general public. Keller Williams has teamed up with Facebook to train its agents on creating virtual home tours and navigating the digital world. Each morning, Keller Williams offers on-demand training sessions with content — including strategies, scripts, and tools to help them tackle today’s real estate challenges remotely.
 
Keller Williams Vice President of Learning Jay Papasan told Housing Wire, “I believe that what we’re seeing is what was once a novelty might become the norm. I think that we’ll see a lot more virtual training in the future because now that people have broken through that barrier, they’re like ‘Okay I can benefit from this and there are real benefits to doing it this way. If I can’t go there, I can do it on demand.’”
 
Bacigalupi and Gray said meeting with agents and staff via Zoom, Facetime, and other means of face-to-face connections helps keep everyone motivated and engaged. “We posted 11 videos today,” Bacigalupi said. The videos often include information about properties, marketing how-tos, industry trends, and other material the company’s agents can quickly put to use.
 
Gray said communication — both internally and with clients — has been uninterrupted. That wouldn’t have been possible with the old PBX systems, aka, Private Branch Exchange telephone networks, in which companies use different channels, like Voice over IP, ISDN, or analog, for internal and external communicating.  
 
“When there was a hurricane in Florida, calls were transferred to Ohio.” [In addition to northern and western Michigan, Coldwell Banker has offices in Ohio, Florida, and the Virgin Islands.] “Now, with the shutdown, we made the transfers in one afternoon.”
 
Like in any business, the ability to be nimble is what’ll keep agencies alive through the crisis and, some theorize, will ultimately determine which are still standing after it’s over.

“We’re still putting deals together,” said Jason Read, team leader and business consultant at Keller Williams. “What we do from here will determine who thrives and survives going forward.”
 
REALTORS PREDICT
“Some days I think it will take right back off. Others, I look at all the people on unemployment. I’ve never been so uncertain,” said Mike Annelin, a Realtor with Century 21 in Traverse City.
 
“Brokers are still fairly confident. I tell my clients no one really knows. I tell them, ‘Let’s hang tight, see what happens in the next couple weeks.’ This is so unprecedented.”
 
“I tell clients this is the great pause,” said Kidd. “It’s unlike anything we’ve had before.” He said the bursting of the housing bubble and subsequent Great Recession in 2007 was a market correction. “It was just time. Here, we were in a roaring economy. People are chomping at the bit to get back to some normalcy.”
 
So the outlook is muddled. “We’ve got appointments booked. Based on demand … I think we’ll be super busy,” said Wagner.
 
The downturn in the stock market might make people leery of spending money. On the other hand, they could see real estate as a better investment. Three months from now, people may see their portfolio is down 15 percent, said O’Brien. That may cause them to suggest they could also buy a home for 15 percent less. Is that realistic? “I think caution will rule the day,” he said.
 
BETTER BUSINESS, OR JUST DIFFERENT?
While agents aren’t able to meet with clients or conduct showings in person, they can direct sellers in the art of shooting photos and videos, which can then be posted — something Read said is proving to be more efficient and very popular with buyers. With virtual open house events, potential buyers can visit multiple houses all from the comfort of their own living room.

“Sellers don’t have to leave their house for three hours. And we’re getting high [numbers of] views. You’d have 10 people [in an actual open house] versus 500 views [in the virtual open house].”
 
Gray believes it’s possible that the pandemic might benefit the northwest lower Michigan market, because it might cause potential buyers to shift their thoughts in a couple of ways. He thinks people in urban areas downstate, where they are crowded together, might be likelier now to seek out more rural areas in this region. “All the people in metro areas, Detroit or Chicago, that wish they had a place Up North [might be] thinking, ‘I’m not going to be trapped down here again.’”
 
Along the same lines, he wouldn’t be surprised to see acreage parcels begin to sell. “In the ’70s, there was a surge to buy vacant acreage in northern Michigan. I’m not sure we won’t see that again.”
 
Like Gray, Read said he believes the pandemic and subsequent shutdown will foster changes in the industry even after the pandemic subsides. “There will be a recalibration of the real estate industry,” he said, from changes in pricing to how buyers shop.
 
BUYING SIGHT UNSEEN
Thanks to the preponderance of online information, buying homes without actually setting foot in them has become more common. That’s especially true now that buying without visiting is the only way to do so. Many are including in the contract a provision that when the buyer does a walk-through inspection, they can still back out of the deal. “We sold one yesterday the [buyer] hadn’t even seen,” said Wagner. “The seller did the video and photos. The inspection is tomorrow — that’s the first time he’ll see the home.”
 
Logan Mohtashami, a financial writer and a senior loan manager in mortgages in California, suggested in an article on HousingWire.com that purchase applications might drop by more than 50 percent. He attributed that to the limited capacity to perform real estate transactions while the economy remains in “stay-at-home” mode, but it’s also true that it may not be a potential buyer or seller’s highest priority at this time.  “While we are homeschooling kids and uncertain if we will remain employed, both buying and selling of homes may seem like a challenge beyond our reserves of energy,” he noted.
 
Another factor is the credit market. Corbin Buttleman is a mortgage loan officer with Lake Michigan Credit Union. He said he expects interest rates to remain low, though there will be movement. “We do a lot of purchases, [but] right now we are doing mostly refinance. It’s a very good time to refinance, but it’s very volatile.”
 
“The question," he added, "is will interest rates stay low? Or do the rates go back up? I think it will be lower rates for a while.”