This is an expanded version of a piece that appears in the recent issue of Louisville Magazine.

The Simple Yet Profound Role of Shelter – Keeping Real Estate in Perspective

- By Jay Gulick, Managing Broker + Partner

One thing is certain if you have a reputation for working in the real estate business: no matter where you go, people ask you to weigh in on the state of the market. The grocery, the gym, cocktail parties, weddings, it doesn’t matter where you are, you invariably get hit with a how, as in how is the real estate market? This is particularly true in times of uncertainty or instability such as the months following the 2008 recession or now during the ever-evolving COVID-19 pandemic.

I’ve always considered it an honor to be asked about the market. One, because it’s nice when people value your opinion about anything. Two, because a person’s home is typically their most valuable financial asset. And three, because even though home ownership represents the largest number on a person or family’s personal balance sheet, it means so much more, especially during times of crisis like we are experiencing now.

Let’s start with what a blessing it is to own a home of your own. In its 2018 Annual Point-In-Time Count, the federal Department of Housing and Urban Development (HUD) reported that 552,830 people in the United States were experiencing homelessness in a single night (33% of whom were families with children). In 2019 the Coalition for the Homeless census identified 6,986 homeless people in Louisville. Because it’s difficult to find and track the homeless population, I suspect the reported numbers are on the low side. The last several months of social distancing and self-quarantining have been difficult even for those of us who have a home in which to take shelter. Imagine trying to follow the example set by Kentucky Governor Andy Beshear to stay “Healthy at Home” if you don’t have a place to call your own.

"As we pause and reexamine all the facets of life that we may have taken for granted in our pre-COVID-19 world, let us focus again on the most fundamental nature of the roof and four walls that surround us."

Which leads to a larger point about the current and future state of the residential real estate market in Louisville and throughout the country as we navigate the effects of COVID-19. With a mercurial stock market and unparalleled levels of unemployment, there is understandably concern too about the health of the housing market. At Kentucky Select Properties our real estate agents were initially seeing less listing and buying activity than they normally would during the beginning of the spring selling season. Unexpected job losses killed a few transactions. Some sellers were more reluctant to let people into their homes. And some buyers, unsure about future job security, were postponing their home searches. Because of social distancing, open houses ground to a halt.

As of early-August, though, the market has picked up considerably and there is quite a bit of activity in this new, sometimes surreal, COVID-19 real estate landscape. Sellers are opening all interior doors and often disinfecting surfaces in between showings. Buyers and their agents are wearing masks and gloves and applying hand sanitizer obsessively. Real estate companies and agents are taking advantage of technology to FaceTime showing appointments, Zoom contract negotiations, utilize virtual property walk-throughs, and sign documents electronically via smartphone or laptop.

The real estate industry may bend for a time, but it will not break. Homes are and always will be inextricably linked to the rhythms and milestones of life – both happy and sad. The birth of a child that necessitates another bedroom or a bigger yard. The death of spouse that renders the maintenance of a property untenable for the one left behind. Real estate agents have proven resilient and reliable over the years because we serve as reassuring and knowledgeable advisors during what are often the most emotional financial transactions of people’s lives. I don’t see that changing.

So, now when people ask me now about the state of the housing market, I have two answers. The first is what people usually expect. We’ve been largely experiencing a seller’s market for the better part of a decade and this was true even before COVID-19. I suspect that higher priced homes will stay on the market a bit longer, and that we may transition to more of a buyer’s market for homes priced at $500,000 and above in the next 6-12 months. Through July of this year the number of homes priced at $500,000+ that have sold is DOWN 1.4% compared to 2019 (286 vs. 290). Interestingly, the sale of homes priced a little cheaper, between $400,000 - $499,999, is UP 24% vs. 2019 (352 vs. 284).

Assuming first-time and younger buyers can maintain employment and that mortgage rates stay within a percentage point of where they are (currently at all-time lows), the sub $250,000 market is going to stay a strong seller’s market and there will continue to be an acute shortage of available inventory.

Overall, the total number of homes sold through July in Louisville in 2020 vs. 2019 is DOWN 4% (6,629 vs. 6,901).

The second thing I will tell my clients, colleagues, friends and neighbors is this may be a good time to reassess how you think about real estate. For those of us fortunate enough to own a place of our own, I would suggest adjusting your perspective. Yes, your home is likely your most important financial investment. And, like the assets in the stock market, the value of your home may take a temporary haircut before this pandemic runs its course. I would argue, however, that the wonderful and practical utility of owning a home has been overshadowed by many people focused solely on its economic promise. For much of the last decade we have been conditioned by HGTV, AirBNB, home flippers and private equity firms buying up hundreds of thousands of single-family homes across the country, to ruthlessly commodify the act of homeownership.

But beyond what your home means to your head (where cerebral concepts like home appreciation and equity dwell), think about what it means to your heart. Your home is the vessel that holds many of your life’s most treasured memories. It is where you tuck your children in for bed. Where you Netflix (and, if you’re lucky, also chill). Where you celebrate birthdays, holidays and sporting events with the people you love.

As we pause and reexamine all the facets of life that we may have taken for granted in our pre-COVID-19 world, let us focus again on the most fundamental nature of the roof and four walls that surround us. And, as we begin to appreciate anew the acts of gathering with friends, going out to restaurants, worshipping under one roof and cheering on our favorite teams, let us be mindful of and grateful for the simple yet profound role of shelter.