Written by: Ted Highland, Kaplan Real Estate Education Product Manager
Published: May 28, 2020
Academic futurists are projecting that the COVID-19 pandemic is going to shape the future of everyday life, including the way real estate business is conducted, the behavior of real estate consumers, and how real estate education takes place.
The National Bureau of Economic Research issued a paper in April 2020 which researched how pandemics affect economic activity in the medium- to long-term. Studying 15 major pandemics dating back to the 14th century, they concluded that an after-effect of pandemics is a reduction in the size of the labor force. The surviving labor market sees a rise in real wages. This labor scarcity may result in less investment and demand for capital. They concluded that these factors result in a reduction in the natural rate of interest, which they estimate will reach its lowest point about 20 years later. We can conclude from this that the coronavirus may, generally, result in stimulating home sales.
This article seeks to identify what specific changes are going to take place in the real estate business and what their impact will be on real estate agents, consumers, and educators.
Responses to Pandemics
Historically, people have responded to pandemics by following certain patterns of behavior. The first step in this pattern involves going through an adjustment stage. Most people in the United States are going through that adjustment stage now. The adjustment stage is where people discover their old habits changing and therefore develop new habits to replace the old ones. Disruption and isolation are very effective in resulting in life evaluation and changing one’s behavior.
These changes are not always negative. When times are normal, we get lulled into routines, develop habits, and invest in relationships that we believe are important. When we live through a crisis, we realize some of these things are not as important to us as they once were. A re-evaluation stage takes place. According to researchers, 61 percent of surveyed respondents indicated they have reduced their spending on luxury goods during this pandemic, and 21 percent indicated that they anticipated continuing to reduce their luxury spending when the pandemic ends. This pattern of thinking might manifest in reduced sales of luxury residences, as well. Maybe owning a big, expensive home will just not seem as important.
Real Estate as an “Essential Service”
Most state governors have classified the transfer and sale of real estate as an essential service. As such, real estate agents are continuing to help consumers with their real estate transactions during this time. Real estate agents and brokers must comply with local guidelines in terms of how to accomplish this objective. Licensees, including individuals and business entities, may use their discretion as to whether or not they wish to continue to operate their businesses with the parameters required, some of which are described below.
Open Houses and Showings
In most states, physical or in-person open houses are either discouraged or not permitted. In a few states, in-person showings of single and multi-family homes that are occupied by renters are prohibited. In other areas, showings are limited to one person or family group, scheduled in advance with the consent of the property owner. Virtual or remote open houses are being required by local regulations. Specialized virtual tour software is available to agents and has become affordable, such as iStaging and Tourwizard.
While readily available and affordable, virtual tours are not without their downsides. As more purchasers buy a property sight unseen, some of them may come back to the agent saying they did not get what they bargained for. As these types of practices become common, contractual language to protect the buyer, seller, and agent will become necessary to protect all parties.
The current pandemic does not invalidate agency law requirements for real estate licensees, especially the duty of confidentiality. If a real estate agent has come into contact with a client and later finds out that the client has contracted COVID-19, the agent cannot notify any other parties that came into contact with the client without the client’s consent. If they cannot obtain consent, they may want to notify the party without identifying the specific client or the property.
According to the U.S. Census, approximately 5 percent of all workers, prior to the pandemic, worked completely from home. The Bureau of Labor Statistics has published data indicating that around 25 percent of workers worked from home at least some of the time. After the outbreak of the COVID-19, Google sent out a memo on March 11, 2020, to all of its tens of thousands of North American employees recommending that they work remotely from home if their positions allowed for it. Joining Google was Microsoft, Apple, Twitter, and other employers.
The issue is not that employees mind working from home for a short time, particularly if they do not see a reduction in pay along with the request. It is that there is something unique that people get from interacting with others that does not fare as well when individuals are subjected to prolonged social isolation. Numerous studies have found that social interaction is critical to mental health and business productivity.
On the one hand, it is easier to talk on the phone while Googling a topic, making a list of tasks, and not having to be establishing eye contact with a person you are talking to. However, texting “LOL” is not the same experience as being with someone and laughing out loud with them. It will be interesting to see how many people, given a chance to work at home, end up preferring it to the traditional social workplace. What we can anticipate is that at least a portion of those confined to working at home right now will desire to continue working remotely after COVID-19. The demand for homes with separate working spaces is bound to increase. The real estate agents who know how to identify combination home/workspaces will find a profitable niche in the future.
Entertainment and Education in the Time of COVID-19
Who would have thought that the day would come when our favorite late-night hosts would be performing for us from their homes with no bands, no witty banter, or glamorous sets? Yet, that is the state of television entertainment in the age of the pandemic. Will we continue to see this version of the late-night variety show once the pandemic is over? Probably not. We will probably return to what we were familiar with in terms of entertainment.
Something that no one would ever believe would happen, however, pre-virus, was that all the schools in the United States, from elementary schools to universities to private real estate schools would stop having live classes with students. Overnight, the only education taking place in the country was distance education. Continuing to educate students of all kinds is especially important, and live streaming video is the key to accomplishing it. While some of these changes are temporary, others will become permanent.
Providing interactive experiences will be essential to the long-term success of live streaming video educational experiences. Passive viewing experience is not enough. Even in the classroom, the historic model of teaching (i.e. “the sage on the stage”) is fading away. No student wants to be lectured. In today’s world, they want to be engaged.
Flexible software solutions can provide true interactivity so that users can communicate as naturally as if they were in the same room. Platform features can help keep participants focused by switching audio and video on and off until the instructor and the students are ready to engage. There are even capabilities where small groups of students can break out to separate electronic rooms to discuss specific topics. Embedded video clips can deliver the participants to the larger world outside of the immediate classroom to make the learning experience limited only by the imagination of the content creators. Once students experience true interactivity and real-time live streaming video with these virtual educational events, there may be no going back to passive educational experiences.