For three years, Phoebe and Michael Koval rented a small one-bedroom apartment in Providence before deciding to venture into the real estate market to purchase their first home.
The move was made partly out of necessity. Phoebe Koval, a graduate student at Brown University, was pregnant with their first child, and the couple wanted some permanency in their living arrangements, as well as a good real estate investment.
So, in a seller’s market amid a pandemic, the Kovals looked to purchase a home.
They bought the first house they saw in June, a 15-year-old, three-bedroom colonial with 2½ bathrooms on a 5,200-square-foot lot in Providence’s North End. Phoebe Koval gave birth shortly after they moved in.
“It wasn’t the smoothest process, but we got it done,” she said, recounting the negotiation process that involved their agent, Shannon Buss, broker associate at Randall Realtors. “We feel like this is home for us.”
The Kovals are part of a shift in the real estate market as the pandemic drives people to seek shelter of one type or another. Real estate professionals say that not only has the crisis pushed people who are longing for stability to buy in a seller’s market, it has forced investors to become their own tenants, residing in homes that were intended to be sources of rental income but are providing distance from COVID-19 hot spots.
“People began to rethink their lives,” said Lori Joyal, managing broker of Lila Delman Real Estate of Watch Hill in Westerly. “Do I want to be in a city on a subway or on the T or in an elevator? Or do I want to be in our beautiful coastal state of Rhode Island close to the ocean and enjoy peace in a beautiful place?”
Joyal said the effects were immediate after the pandemic first hit last March. While businesses were closing and people were heeding stay-at-home orders, the real estate market along the Rhode Island coastline never cooled off, fueled by people looking to flee dense population centers such as New York City and Boston, where COVID-19 cases were climbing quickly.
‘If I could find a nice rental in March of 2020, they were scooped up immediately.’
LORI JOYAL, Lila Delman Real Estate of Watch Hill managing broker
Properties of all types in the Westerly area were white-hot commodities, she said.
“If I could find a nice rental in March of 2020, they were scooped up immediately by buyers as the exodus from the cities began,” Joyal said.
Enabling that exodus was the ability for people to work remotely, so properties that would normally serve as vacation homes to be rented out for additional income became primary residences and virtual workplaces for the owners.
Danielle Hale, a chief economist for realtor.com, noted this trend in her housing forecast for 2021. She said there was a spike in home sales in 2020 as investors sought the purchase of investment properties that some occupied as a haven to ride out the pandemic.
“One of the big winners [in the pandemic] has been the housing market, which saw home sales and prices hit decade-plus highs following decade lows in the span of a few months,” Hale said, adding that as remote work extends in 2021, home listings will put more emphasis on features such as home offices and high-speed internet connections.
And it’s not just vacation homes in coastal communities.
As real estate prices climb across the spectrum of properties, so too are rents. That is persuading tenants who can afford it to leap into a hot real estate market with the promise of fixed monthly payments that go toward building equity and the possibility that such an investment will pay dividends in the long run.
Further prodding buyers are low interest rates. The rate for a 30-year fixed mortgage as of January 2021 is 2.93%, compared with 3.62% for the same month a year ago, according to bankrate.com.
“For a consumer who qualifies for a mortgage, purchasing a property makes more sense than renting because many times the payment is comparable,” said Buss. “The problem, of course, is that the inventory is so low that these first-time buyers are competing with everyone else.”
Indeed, the market is clearly in the favor of sellers at the moment. In a balanced market, there is a six-month inventory of homes for sale, according to real estate professionals. That number has been declining in Rhode Island. A year ago, the inventory was 2.6 months, already a strong seller’s market. As of November, the number had sunk to 1.7 months.
As the economic effects of the pandemic continue to play out in 2021, the pendulum may start swinging toward the buyer. Homeowners struggling with financial hardships such as a job loss might sell to access home equity.
“It will be interesting to see if we start experiencing a wave of distressed properties this year when the dust settles,” Buss said. “I would expect that investors will reenter the market as those opportunities present themselves.”
For the Kovals, the low interest rates and a chance to invest in their future overcame concerns about the pandemic and high real estate prices.
“House shopping in 2020 was strange to say the least,” said Phoebe Koval, recalling how the couple had to sign the purchase-and-sales agreement through the window of their car in a grocery store parking lot.
“Operating as a buyer instead of a renter allowed us to be picky about our living situation,” she said. “It made us feel more in control about our decisions and about what we asked for in our home.”
Cassius Shuman is a PBN staff writer. Email him at Shuman@PBN.com.