Real Estate

Real estate in COVID-19: How industry leaders are adapting a year into the pandemic

A view of the Palo Alto Hills neighborhood on Sept. 15, 2020. Photo by Magali Gauthier.

It's been a year since the pandemic brought the region to a screeching halt midway through March 2020 catapulting the home industry into a new reality that has redefined everything from the ways properties are shown and marketed to how loans are processed to what kinds of renovations, floor plans and home features are most desirable in a world that has changed the way people interact with one another in public and private spaces.

Three months into initial shutdown, a handful of industry leaders representing mortgage lending, construction and residential real estate shared their perspectives with the Weekly on how their sectors were being re-envisioned and what changes — for better or worse — might be here to stay. The Weekly reached out to these same industry leaders on the one-year mark of the March shutdown to see what's changed and what hasn't since then. Their interviews have been lightly edited for length and clarity.

Derk Brill

Realtor, Compass

Briefly describe what this past year has looked like for you.

The past year has been all about adapting and evolving. When COVID -19 hit, we needed to reassess how we perform our function and represent our clients during a time of social distancing.

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After a quiet period at the beginning of the pandemic, the market resumed in May under new and more restrictive requirements (no traditional open houses, showings by appointment only, visitors limited to two people from the same household), and agents and buyers/sellers adapted to the circumstances — including these ever-changing safety guidelines around property showings. In the past month, the market has been exceptionally strong.

Derk Brill is a Realtor at Compass Real Estate. Courtesy Derk Brill.

How has the new normal — the isolation, working and learning from home — changed the market?

The short answer is that much has changed, and many things have remained the same. COVID-19 has changed what buyers value in a property, be it location, square footage or lot size. Working from home has given them the opportunity to live farther from traditional work and housing centers. Since open houses are still not viable, there has been a shift in the marketing process as well, with all aspects of the home (photos, floorplan and videos) online. What hasn't changed is what buyers have traditionally valued: good schools and neighborhoods.

What's your view on the real estate market right now? What's next?

The current market is as strong as it's been in years. Interest rates, tax code modifications and shifting buyer trends are propelling the market forward. We expect the change from the new Prop. 19 tax law to add to available inventory, and the hope is that this additional inventory will ease demand pressure.

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The Fed has indicated a desire to keep rates at historically low levels for the next two years, which adds additional long-term optimism. My view of the near term is that in the coming months, we will see a significant increase in inventory as sellers see us coming out of restrictions and Prop. 19 goes into effect.

Derk Brill is a Palo Alto native who has ranked among the top-producing agents in the United States during his 21 years as a Realtor practicing in his hometown.

Arti Miglani

Arti Miglani is a Realtor at Compass Real Estate. Courtesy Arti Miglani.

Realtor, Compass

How has the new normal changed the market?

Social distancing and working from home made home ownership more important for everyone. The focus turned to more outdoor space and quality spaces within a home. Migration of people from larger cities to the suburbs was very noticeable. Families with young children chose to sell their homes in San Francisco and move to the suburbs to buy a home or even rent a home. Condo and town house owners traded up to single-family homes, increasing demand for single-family homes. Many renters moved in with their families. This shift caused the rental market to drop in larger cities and put more pressure on the real estate market in the suburbs. Those buyers who could not afford to enter the real estate market in the Bay Area moved out of state to Texas, Colorado and Arizona, the fastest growing states in the country.

With respect to how you go about your business, what changes do you think are here to stay?

The pandemic forced us to go paperless and to work remotely with our transaction coordinators. Hard copies of brochures for homes for sales are no longer used. This trend, I believe will continue. Buyers are taking more time to review a home and related disclosures online before they schedule a showing for a home. Online marketing with floor plans will be important for any buyer or seller moving forward.

What's your view on the real estate market right now? What's next?

With widespread availability of vaccinations and low-interest rates, buyers' confidence is back. Schools are reopening and on-campus teaching is expected to be 100% in the fall. Many buyers, especially in the technology space, are feeling more confident about their jobs. All this, along with a continuous shortage of inventory has caused the real estate market to be frenzied since January, and homes are selling with multiple offers. One of my listings, for example, sold earlier this year with multiple offers and 10% over the asking price. The showing appointments get booked immediately. I think the real estate market will continue to remain strong.

Arti Miglani has ranked among the top 1% of top-producing Realtors in Silicon Valley during her 20-plus years as a Realtor practicing in the Bay Area.

Michael Repka

Michael Repka is CEO of DeLeon Realty. Courtesy DeLeon Realty.

CEO, DeLeon Realty

Briefly describe what this past year has looked like for you.

While we have encountered a good bit of trepidation on the part of buyers, there has been, and continues to be, a strong demand for well-presented properties. There are two reasons for this: First, the interest rates remain exceptionally low; and second, we have all spent much more time in our homes over the past year, so many people have realized they would like something different.

The market also has been bifurcated. Many agents have scaled back the amount of marketing that they've done as a result of fear that homes may not sell. This often created a self-fulfilling prophecy. Because the homes were not staged and presented well, and lacked significant marketing, especially narrated videos, those homes did not compete well with properties that were well presented.

How has the new normal of the pandemic — the isolation, working and learning from home — changed the market?

We have seen an increased demand for larger homes, lots, and enhanced amenities. The premium placed on properties with good walkability to restaurants, bars and coffee shops has waned. Also, many people are looking for a dedicated study or, in some cases, multiple areas that could be used for Zoom calls simultaneously.

Have you seen a turning point where you feel like the industry is either heading back to normal or moving farther away from the old normal?

The overall market has definitely improved this Spring, however, there are an inordinate number of homes that will be coming on the market over the next few months. This may create a situation of over supply. It's hard to anticipate exactly when this will hit, but it is likely to be contemporaneous with increased discussions about raising the maximum Federal capital gains tax rate from 20% to 39.6%, as proposed.

What's your view on the real estate market right now? What's next?

The real estate market should remain strong as long as interest rates stay low and the capital gains taxes are not increased. There could, however, be a dip in prices if those two factors change.

Michael Repka is the chief executive officer, managing broker and general counsel of DeLeon Realty.

Lisa Sten

Lisa Sten is CEO of Harrell Modeling. Courtesy Lisa Sten.

CEO, Harrell Remodeling

Briefly describe what this past year has looked like for you.

We had a very busy year in both design and construction. We were able to operate as an essential business with our construction job sites opened by early May following all the necessary protocols and procedures under the Santa Clara County shelter-in-place order (temperature checks, hand-washing stations and social distancing). Several of our designers and office staff work remotely some of the time, and our first few meetings with prospective clients have been via Zoom or other platforms ... rather than face-to-face.

How are clients reacting to this new normal in the types of projects they're requesting?

Design requests have changed for homes in the last year, with more requests leaning toward outdoor living -- not just kitchens, but rooms, seating areas, screened areas and so on. People are looking to create home offices or study and work nooks and to add accessory dwelling units for multi-generational living. There's also been a focus on increased performance of Indoor air quality, voice-activated smart home features, accommodations for pets and an increase in open floor plans with private spaces within that space.

We're seeing requests for kitchens with multiple stations for cooking and prep work, butler pantries and highly customized storage.

In our experience, the projects we're seeing typically include several rooms, or a wing of the house. We're seeing less requests for just one-room makeovers like a bathroom.

Have you seen a turning point where you feel like the industry is either heading back to normal or moving farther away from the old normal?

Our industry weathered the pandemic well. The "turning point" for us will be when we determine how many of us can return to the office full time. Because of our strong company culture and team collaboration, our need to be together in person may be more important, for example, than a tech company's need.

Lisa Sten is an award-winning designer and CEO of Harrell Remodeling. She joined the Palo Alto-based residential remodeling company's design + build team in 2000.

Eric Trailer

Eric Trailer is a mortgage lender at Bank of the West. Courtesy Eric Trailer.

Mortgage lender, Bank of the West

Briefly describe what this past year has looked like for you?

The last year has been all about adaptability and patience, in particular, given the higher-than-normal anxiety levels of clients due to the environment created by COVID-19.

From a transaction perspective, a portion of the silver lining has been the efficiency of people financing new property purchases. In many past spring and summer markets — including 2021 so far — the demand for homes on the market has been so competitive that many clients strike out multiple times before successfully securing a contract on a new home. Last year saw a more balanced market.

Have you seen a turning point where you feel like the industry is either heading back to normal or moving farther away from the old normal?

While I am definitely seeing underwriting guidelines and allowances returning to the pre-COVID-19 period, business practices appear to be shifting to a more distanced transaction: more mortgage bankers, underwriters and processors working from home; more virtual appraisals than on-site property visits; few physical documents involved in the process; and virtual sign-off of transactions, where only the notary delivers documents to and from the clients.

What's next for 2021?

Interest rates are rising, and my sense is that the 10-year U.S. Treasury index will rise above 2% by the fourth quarter of this year, which translates into mortgage rates returning to the 4% level. As such, housing affordability will take a hit, but the demand for housing has returned to the levels that I've seen in pre-COVID-19 markets, and I am seeing greater confidence in my clients' housing goals and financial planning for 2021 and beyond.

There also has been more interest among homeowners in expanding their current homes to enhance the work-at-home experience, which will increase demand for cash-out refinances and home equity lines of credit.

Also, with demand for home loans on the decline due to a decrease in refinance transactions, banks will be looking to incent would-be homebuyers with attractive loan discounts on rates and fees, as well as provide more aggressive lending guidelines.

Eric Trailer is an experienced executive in mortgage lending who has worked in the Silicon Valley real estate industry since 2002. He currently lives in Palo Alto.

View more stories in Spring 2021 Real Estate publication here.

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Real estate in COVID-19: How industry leaders are adapting a year into the pandemic

by / Palo Alto Weekly

Uploaded: Fri, Apr 30, 2021, 4:29 pm

It's been a year since the pandemic brought the region to a screeching halt midway through March 2020 catapulting the home industry into a new reality that has redefined everything from the ways properties are shown and marketed to how loans are processed to what kinds of renovations, floor plans and home features are most desirable in a world that has changed the way people interact with one another in public and private spaces.

Three months into initial shutdown, a handful of industry leaders representing mortgage lending, construction and residential real estate shared their perspectives with the Weekly on how their sectors were being re-envisioned and what changes — for better or worse — might be here to stay. The Weekly reached out to these same industry leaders on the one-year mark of the March shutdown to see what's changed and what hasn't since then. Their interviews have been lightly edited for length and clarity.

Realtor, Compass

Briefly describe what this past year has looked like for you.

The past year has been all about adapting and evolving. When COVID -19 hit, we needed to reassess how we perform our function and represent our clients during a time of social distancing.

After a quiet period at the beginning of the pandemic, the market resumed in May under new and more restrictive requirements (no traditional open houses, showings by appointment only, visitors limited to two people from the same household), and agents and buyers/sellers adapted to the circumstances — including these ever-changing safety guidelines around property showings. In the past month, the market has been exceptionally strong.

How has the new normal — the isolation, working and learning from home — changed the market?

The short answer is that much has changed, and many things have remained the same. COVID-19 has changed what buyers value in a property, be it location, square footage or lot size. Working from home has given them the opportunity to live farther from traditional work and housing centers. Since open houses are still not viable, there has been a shift in the marketing process as well, with all aspects of the home (photos, floorplan and videos) online. What hasn't changed is what buyers have traditionally valued: good schools and neighborhoods.

What's your view on the real estate market right now? What's next?

The current market is as strong as it's been in years. Interest rates, tax code modifications and shifting buyer trends are propelling the market forward. We expect the change from the new Prop. 19 tax law to add to available inventory, and the hope is that this additional inventory will ease demand pressure.

The Fed has indicated a desire to keep rates at historically low levels for the next two years, which adds additional long-term optimism. My view of the near term is that in the coming months, we will see a significant increase in inventory as sellers see us coming out of restrictions and Prop. 19 goes into effect.

Derk Brill is a Palo Alto native who has ranked among the top-producing agents in the United States during his 21 years as a Realtor practicing in his hometown.

Realtor, Compass

How has the new normal changed the market?

Social distancing and working from home made home ownership more important for everyone. The focus turned to more outdoor space and quality spaces within a home. Migration of people from larger cities to the suburbs was very noticeable. Families with young children chose to sell their homes in San Francisco and move to the suburbs to buy a home or even rent a home. Condo and town house owners traded up to single-family homes, increasing demand for single-family homes. Many renters moved in with their families. This shift caused the rental market to drop in larger cities and put more pressure on the real estate market in the suburbs. Those buyers who could not afford to enter the real estate market in the Bay Area moved out of state to Texas, Colorado and Arizona, the fastest growing states in the country.

With respect to how you go about your business, what changes do you think are here to stay?

The pandemic forced us to go paperless and to work remotely with our transaction coordinators. Hard copies of brochures for homes for sales are no longer used. This trend, I believe will continue. Buyers are taking more time to review a home and related disclosures online before they schedule a showing for a home. Online marketing with floor plans will be important for any buyer or seller moving forward.

What's your view on the real estate market right now? What's next?

With widespread availability of vaccinations and low-interest rates, buyers' confidence is back. Schools are reopening and on-campus teaching is expected to be 100% in the fall. Many buyers, especially in the technology space, are feeling more confident about their jobs. All this, along with a continuous shortage of inventory has caused the real estate market to be frenzied since January, and homes are selling with multiple offers. One of my listings, for example, sold earlier this year with multiple offers and 10% over the asking price. The showing appointments get booked immediately. I think the real estate market will continue to remain strong.

Arti Miglani has ranked among the top 1% of top-producing Realtors in Silicon Valley during her 20-plus years as a Realtor practicing in the Bay Area.

CEO, DeLeon Realty

Briefly describe what this past year has looked like for you.

While we have encountered a good bit of trepidation on the part of buyers, there has been, and continues to be, a strong demand for well-presented properties. There are two reasons for this: First, the interest rates remain exceptionally low; and second, we have all spent much more time in our homes over the past year, so many people have realized they would like something different.

The market also has been bifurcated. Many agents have scaled back the amount of marketing that they've done as a result of fear that homes may not sell. This often created a self-fulfilling prophecy. Because the homes were not staged and presented well, and lacked significant marketing, especially narrated videos, those homes did not compete well with properties that were well presented.

How has the new normal of the pandemic — the isolation, working and learning from home — changed the market?

We have seen an increased demand for larger homes, lots, and enhanced amenities. The premium placed on properties with good walkability to restaurants, bars and coffee shops has waned. Also, many people are looking for a dedicated study or, in some cases, multiple areas that could be used for Zoom calls simultaneously.

Have you seen a turning point where you feel like the industry is either heading back to normal or moving farther away from the old normal?

The overall market has definitely improved this Spring, however, there are an inordinate number of homes that will be coming on the market over the next few months. This may create a situation of over supply. It's hard to anticipate exactly when this will hit, but it is likely to be contemporaneous with increased discussions about raising the maximum Federal capital gains tax rate from 20% to 39.6%, as proposed.

What's your view on the real estate market right now? What's next?

The real estate market should remain strong as long as interest rates stay low and the capital gains taxes are not increased. There could, however, be a dip in prices if those two factors change.

Michael Repka is the chief executive officer, managing broker and general counsel of DeLeon Realty.

CEO, Harrell Remodeling

Briefly describe what this past year has looked like for you.

We had a very busy year in both design and construction. We were able to operate as an essential business with our construction job sites opened by early May following all the necessary protocols and procedures under the Santa Clara County shelter-in-place order (temperature checks, hand-washing stations and social distancing). Several of our designers and office staff work remotely some of the time, and our first few meetings with prospective clients have been via Zoom or other platforms ... rather than face-to-face.

How are clients reacting to this new normal in the types of projects they're requesting?

Design requests have changed for homes in the last year, with more requests leaning toward outdoor living -- not just kitchens, but rooms, seating areas, screened areas and so on. People are looking to create home offices or study and work nooks and to add accessory dwelling units for multi-generational living. There's also been a focus on increased performance of Indoor air quality, voice-activated smart home features, accommodations for pets and an increase in open floor plans with private spaces within that space.

We're seeing requests for kitchens with multiple stations for cooking and prep work, butler pantries and highly customized storage.

In our experience, the projects we're seeing typically include several rooms, or a wing of the house. We're seeing less requests for just one-room makeovers like a bathroom.

Have you seen a turning point where you feel like the industry is either heading back to normal or moving farther away from the old normal?

Our industry weathered the pandemic well. The "turning point" for us will be when we determine how many of us can return to the office full time. Because of our strong company culture and team collaboration, our need to be together in person may be more important, for example, than a tech company's need.

Lisa Sten is an award-winning designer and CEO of Harrell Remodeling. She joined the Palo Alto-based residential remodeling company's design + build team in 2000.

Mortgage lender, Bank of the West

Briefly describe what this past year has looked like for you?

The last year has been all about adaptability and patience, in particular, given the higher-than-normal anxiety levels of clients due to the environment created by COVID-19.

From a transaction perspective, a portion of the silver lining has been the efficiency of people financing new property purchases. In many past spring and summer markets — including 2021 so far — the demand for homes on the market has been so competitive that many clients strike out multiple times before successfully securing a contract on a new home. Last year saw a more balanced market.

Have you seen a turning point where you feel like the industry is either heading back to normal or moving farther away from the old normal?

While I am definitely seeing underwriting guidelines and allowances returning to the pre-COVID-19 period, business practices appear to be shifting to a more distanced transaction: more mortgage bankers, underwriters and processors working from home; more virtual appraisals than on-site property visits; few physical documents involved in the process; and virtual sign-off of transactions, where only the notary delivers documents to and from the clients.

What's next for 2021?

Interest rates are rising, and my sense is that the 10-year U.S. Treasury index will rise above 2% by the fourth quarter of this year, which translates into mortgage rates returning to the 4% level. As such, housing affordability will take a hit, but the demand for housing has returned to the levels that I've seen in pre-COVID-19 markets, and I am seeing greater confidence in my clients' housing goals and financial planning for 2021 and beyond.

There also has been more interest among homeowners in expanding their current homes to enhance the work-at-home experience, which will increase demand for cash-out refinances and home equity lines of credit.

Also, with demand for home loans on the decline due to a decrease in refinance transactions, banks will be looking to incent would-be homebuyers with attractive loan discounts on rates and fees, as well as provide more aggressive lending guidelines.

Eric Trailer is an experienced executive in mortgage lending who has worked in the Silicon Valley real estate industry since 2002. He currently lives in Palo Alto.

View more stories in Spring 2021 Real Estate publication here.

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