By Katy McLaughlin
Real estate is a local industry and, as a rule, varies widely
from market to market. But when Covid detonated in March, even that
constant was upturned: For two weeks or more, deals everywhere fell
apart, closings were delayed, buyers didn't shop and sellers
wouldn't let them in anyway.
We worked with the data team at Realtor.com to find out what
happened next. ( News Corp, owner of The Wall Street Journal, also
operates Realtor.com under license from the National Association of
Realtors.) The first step was for Realtor.com to analyze closed
sales of homes at $1 million and up to find the 10 top buyer's and
seller's markets nationwide. This process means that there is about
a four-month lag between the home sales data and this guide,
because it can take months for all of the counties to register the
deeds in the public record.
Normally, that lag isn't a big obstacle to understanding current
conditions: Market dynamics tend to turn like slow-moving ocean
liners. But this year was anything but normal. In some of our
markets, the patterns observed in the Realtor.com data changed so
dramatically throughout the summer that agents were reporting the
exact opposite conditions once they were interviewed in the
To find out what is happening on the ground now, we interviewed
over 50 agents and buyers in these markets. We also tapped Zillow
for a list of the metro regions attracting the greatest number of
luxury home searches by people who live in another region to give
us a sense of where buyers are likeliest to flock next.
The result is The Wall Street Journal's second annual Buyers
Guide, a data-driven report on market conditions rich with advice
from insiders on how to negotiate during this strange time.
What is a seller's market?
-- The market has more demand than supply, with low levels of
inventory and a high absorption rate.
-- Sales prices in the top 5% of the market are growing at or
above 4% year over year.
-- Positive yearly percentage change in both $1 million sales
and absorption rates.
-- Realtor.com analyzed data from April to the end of June 2020,
in markets with at least 30 monthly listings on average and at
least three monthly $1 million sales.
Liz Lawson and Reed Kowit lived in Los Angeles for 10 years and
fit right in. Ms. Lawson, 40, was busy as the music supervisor on a
roster of television shows, and Mr. Kowit wrote screenplays and
worked in production. Then Covid hit. Suddenly, their work
evaporated, their 3-year-old son was isolated, and they wanted to
be closer to their families, said Ms. Lawson.
Their target area: Arlington and Fairfax County, Va., which is
the top seller's market in the country. In some ZIP Codes, over 40%
of homes above $1 million are purchased within one month of
listing, according to Realtor.com's data. The region is so hot, it
occupies both the first and second top spots in the study, with
nearby Alexandria City coming up as the next strongest seller's
market. The couple's real-estate agent, John Eric of Compass,
issued a warning.
"He told us it was a really hot market and to be prepared for it
to be competitive," said Ms. Lawson, who now works as the author of
young adult novels.
"The impact of Covid has seen a massive influx of buyers from
around the country in our market," Mr. Eric said, citing Los
Angeles, San Francisco, and New York City as primary feeder cities.
Some parts of the region have been seller's markets for several
years, driven by demand from workers in government and technology
jobs. Between April and June, demand for homes in Fairfax County,
Falls Church, Arlington County and Alexandria City grew, according
to Mr. Eric and other agents in the market, and has only
Ms. Lawson and Mr. Kowit flew across the country in May and
looked at homes, soon landing on a 5,000-square-foot, five-bedroom
white farmhouse under construction and listed for $1.799 million in
a part of Falls Church that lies within Fairfax County. Because it
had another offer, Mr. Eric advised the couple of proffer their
"best and final," which was $1.85 million in cash, with no design
changes required. They got the home, which should be finished by
Several of the top seller's markets on Realtor.com's list bear
similarities to the region Ms. Lawson and Mr. Kowit coveted: They
are suburban areas close to big employment centers that offer
larger homes and lots and where new construction, home offices and
pools are in high demand.
Another such area is Essex County, Mass., north of Boston, where
agents say demand has skyrocketed for luxury homes with beach
access or water views. Syndi Zaiger of Nest Compass said that while
"it's often difficult to sell homes of $3 million and up," times
have changed. She had clients who got into a bidding war in July
for a Manchester-by-the-Sea home listed for $2.949 million. The
couple, who were about to get married, ended up getting it by
offering the full asking price and no contingencies -- not even a
home inspection, Ms. Zaiger said. The fiancé then put his own home
on the market, had his first showing the Thursday before Labor Day
weekend, got two offers and went into contract that weekend for
$1.77 million -- slightly below his $1.79 million asking price.
In Riverside County, about an hour east of Los Angeles, the late
spring, summer, and fall boom took some agents by surprise. Rob
Murray, owner of Crest Sotheby's International Realty who also owns
an escrow company, said that in late March until about mid-April,
15% to 20% of his escrows cancelled as deals fell apart and sellers
took properties off the market. The market remained subdued
throughout April and Mr. Murray steeled himself for major
"I was dead wrong," Mr. Murray said. Around May, he started to
notice an influx of buyers and bizarrely high prices paid for homes
that had been on the market for months and sometimes years.
One of Mr. Murray's listings, a 7,845-square-foot, seven-bedroom
hillside Mediterranean that had been listed for two years and was
offered at $1.695 million, sold for $1.9 million. The buyers, who
closed in mid-September, were Dwight and Luz Wilcox. Mr. Wilcox
said they had lost out on a house in May, because it took the
couple -- who co-own a trucking company and two insurance companies
-- too long to get preapproved for a jumbo loan. When Mr. Wilcox
saw his current home, he was determined to beat out any
competitors, which led him to bid $205,000 above the asking
What is a buyer's market?
-- The market has more supply than demand, with high levels of
inventory and relatively low levels of sales.
-- Luxury sales prices -- the top 5% of the market -- were
growing less than 1% or declining year over year.
-- Negative year-over-year percentage change in both $1 million
sales and absorption rates
-- Markets have at least 30 monthly listings on average and at
least one monthly $1 million sale.
-- Realtor.com analyzed closed sales from April and June 30,
Chandler Rapson, a 48-year-old private-equity investor and
entrepreneur, sold one of his companies and was ready to buy his
family the dream home they'd always wanted. His wife Roslyn had her
eye on $2 million to $4 million homes in Hillsborough County, Fla.,
which is on the seller's market list. But Mr. Rapson smelled
opportunity in one of the top buyer's markets on the list: Pinellas
Clearwater and Clearwater Beach, like much of Pinellas County's
real-estate market, were hard hit by the Covid crisis, said Michael
Wyckoff, managing broker for Engel & Völkers Madeira Beach. In
Mr. Wyckoff's words, the Pinellas market "went into the fetal
position" -- from March through June. Whole categories of buyers
disappeared: Canadians -- once 10% to 15% of the buyer pool, Mr.
Wyckoff estimated -- were unable to cross the border, and snowbirds
from Michigan, Ohio, Illinois and upstate New York sheltered in
place at home.
Since then, things have picked up, numerous agents in the area
agreed. But the house Mr. Rapson spotted this summer was a
5,300-square-foot colonial-style waterfront home in Clearwater that
was lingering on the market. It had originally been listed in
mid-2019 for $1.6 million, but because it was outdated, buyers were
turned off, Mr. Wyckoff said. Mr. Rapson estimated it needed about
$500,000 to turn it into a true contemporary luxury home.
"I offered $1 million and I said 'you have 24 hours to take it
or leave it,'" Mr. Rapson said. The seller came back asking for
$1.1 million. The deal closed at the end of August.
Some counties that rank high on the buyers list have been that
way for a while, as non-Covid factors, such as an oversupply of
luxury product, were degassing the market long before Covid hit.
New York City and commuter areas in New Jersey experienced this,
and then got a double-whammy in the form of the worst regional
health crisis of the pandemic.
Since March, buyers have been getting major discounts, said
Megha Moza, an agent with Prominent Properties Sotheby's
International Realty. Ms. Moza said one of her buyer clients had
agreed to pay $1.1 million for a Weehawken, N.J., condo in April.
Offers in this market are made verbally, so it hadn't been
committed to paper. As the virus crisis wore on, her buyer decided
he didn't want the property unless he could reduce his bid to $1.07
million, which was accepted. The deal closed in July.
Other clients have received unprecedented incentives from
builders, she said. For example, in March, a client who bid $1.3
million for a Jersey City condo got a free storage space, closing
costs and a year of waived homeowner association fees -- a package
worth $100,000, Ms. Moza said.
"The developer doesn't want to reduce the price that can be seen
by the public. But they will offer incentives," to close a deal,
That brings the conversation to the curious case of Santa
Barbara County, which ranked as the top buyer's market in this
study. The statistics make it sound like a great opportunity to
snap up a coastal resort home under optimal conditions.
Unfortunately for buyers, even in a normal year, a high position
on this list doesn't mean that these areas are rife with bargains.
Instead, buyer's market conditions represent a downshift from the
prior year -- which might have been smoking hot -- as well as the
pace at which property is moving at current prices. Sometimes,
these conditions lead to price reductions, but not always --
particularly if buyers storm back into the market and absorb the
Such was the case here in this unprecedented year, where roughly
10 real-estate agents laughed at the idea that buyers are
controlling the current market in Santa Barbara County.
"It is anything but a buyer's market. There is no inventory,"
said Wendy Gragg, the broker and owner of Distinctive Real Estate
Realtor.com's economic research analyst Nicolas Bedo credited
the March freeze and subsequent surge for the disconnect between
the data and the experience on the ground. "It's possible that
downtown neighborhoods closer to the coast have experienced a more
rapid recovery," he said. "The situation in changing quickly."
Several agents who specialize in homes within Santa Barbara proper
and Montecito said that after a dead March and slow April, droves
of buyers began flooding in from Los Angeles, San Diego, New York
Agents in Solvang and Santa Ynez, two inland, agricultural areas
of Santa Barbara County, understood why their market was
characterized as favoring buyers in the early part of year, but
also said that it is no longer true. Allan Jones, president of
Santa Ynez Valley Real Estate Company, said while ranches typically
take a long time to sell, "one started moving, then another, and
now inventory is the lowest I've seen in 32 years."
Among buyers was Jon Lukas, who closed on a 5-acre property in
Solvang at the end of August. Mr. Lukas, a 47-year old investor,
has lived in Santa Barbara County for years but dreamed of a larger
property where his daughter Savannah, 11, could ride her horse. On
a walk, he came across his new home, listed for $2.54 million.
The asking price might have been high for the area before Covid,
said Patty Murphy, Mr. Lukas's agent at Sotheby's International
Realty-Patty Murphy Country Estates. But in the pandemic-influenced
market, demand for properties on larger parcels skyrocketed, she
said. Mr. Lukas offered $2.37 million and leased the property back
to the sellers for a month, charging them only $2,500 and running
the risk that they would overstay. Everything worked out, however,
and Mr. Lukas and his daughter moved in mid-October. Also making
the move: Marble, Savannah's quarter horse, and Albert, Mr. Lukas's
horse; Beatrice, Coco and Bon Bon, the family's goats; 20 chickens,
a cat, a dog, a bunny and a piglet named Hamlet.
What is a migration destination?
-- The metro areas with the most page views for homes valued at
$1 million and up by people who don't live in those metro areas,
ranked by percentage increase since last year, according to an
analysis by Zillow.
Drew Erra, a 52-year-old insurance broker and moving-company
co-owner, and wife Melissa Erra, lived in Minneapolis for 24 years.
But in July -- when many Americans were realizing that working from
home, remote learning and social distancing would be the new
reality for a long time -- they picked up and moved to Las Vegas.
Their new home, a $3.2 million, arts-and-crafts home with a pool
and golf-course views, cost over $2 million more than the one they
sold in Minneapolis.
"I was paying 10.5% state income tax in Minnesota," a rate which
has now dropped to zero in tax-free Nevada, Mr. Erra said. "Just
the tax savings alone covered the cost of the house."
In their migration to Las Vegas, the Erras had company. Searches
by out-of-towners for homes over $1 million in the Las Vegas metro
area surged by 155% from last year, according to Zillow's analysis.
Ten agents and brokers in the area said they have never seen more
"More are driven to come here by high taxes in their states,"
said Heidi Kasama, the listing agent at Berkshire Hathaway Home
Services Nevada Properties for the home the Erras purchased.
Weather is also a draw. "We have a few hot months, but we don't
have hurricanes or floods," she said.
High on Zillow's list are several traditional vacation-home
destinations, where local agents say demand is up as more people
look for an escape from the city where they live full time and as
more people are relocating now that they can work from home. Hilton
Head, S.C., Jackson, Wyo., and the towns on Cape Cod, Mass., all
saw big search growth. The number two spot on the list is held by
Kalispell, Mont., the metro area of the Whitefish ski resort area,
Glacier National Park and Bigfork Lake. Local agents say that after
March, they got a surge in calls about both vacation and permanent
"We've been seeing this growth for the last five years, but it's
on steroids now," said Stephanie Sunshine, a broker with National
Parks Realty in Whitefish.
One of Ms. Sunshine's buyers was Doug Allen, who closed on a
$1.2 million log-cabin-style home in Kalispell in March. Mr. Allen,
a 45-year-old scrap-metal business owner and his wife, Janel Allen,
49, live in Longview, Texas. Mr. Allen became familiar with the
Kalispell area while working as a pilot for a cargo airline in his
late 20s and vowed to one day make the region part of his life.
The home now serves as a part-time escape for the Allens and
their three children, who spent much of the summer there, mountain
biking, zip lining, alpine sliding, and fishing for trout and
Austin, Houston and Dallas all showed out-of-town search
increases since last year, which is no surprise to Marie Bailey, an
agent with Fathom Realty in McKinney, Texas. After her own
relocation from El Segundo, Calif., to Prosper, Texas, in 2017, she
became a real-estate agent and the following year started a
Facebook group called "Move to Texas from California!" The group
now has over 21,000 members and has generated roughly 70 leads to
whom Ms. Bailey has sold homes. Interest has surged since March,
Ms. Bailey said, noting that many posts on the page express outrage
over restrictions on business and education imposed by state and
local government in California, Ms. Bailey said.
"Most of my members are looking for a lower cost of living," Ms.
Bailey said. "They also feel there will be more political
acceptance in Texas."
A search for cheaper luxury homes is driving interest in Salt
Lake City, the third entry on Zillow's list.
Adam Kirkham, with Summit Sotheby's International Realty in Salt
Lake, said that as of October 1, there was 45% less inventory above
$1 million compared with a year ago.
"Anecdotally, buyers are coming from Los Angeles and the Bay
Area, which is by far the highest feeder market from California,"
Mr. Kirkham said. "From the East Coast, it's from Virginia, the
D.C. area, New York and Boston." Most transplants have some
connection to Utah through family or having gone to school there,
This year, Mr. Kirkham participated in deals for five buyers
relocating from out-of-state who paid between $2 million and $3.5
million in the suburb of Holladay, he said. In August, a buyer
moving from Seattle paid $2.3 million for an 11,653-square-foot
home Mr. Kirkham listed.
"A lot of buyers have equity from more expensive markets, like
in California, and they are bringing it with them to the Mountain
West," he said.
Write to Katy.McLaughlin at Katy.McLaughlin@wsj.com
(END) Dow Jones Newswires
October 29, 2020 12:40 ET (16:40 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.