Last week I had the pleasure of tuning into a Lawrence Chamber of Commerce meeting concerning the effects of the 2020-21 Pandemic on local small businesses in Lawrence. I was really encouraged by what I heard! Businesses aren't just withering away. Instead, they're finding ways to adapt and thrive through the current challenges. Real Estate is no different. Realtors continue to find ways to navigate the changes that we've all had to face in some form or another. So, what have been the effects of Covid-19 on real estate?
Initially, back in March 2020, the outlook was not good. Listing activity plummeted. Things got really quiet as we entered the shutdowns. But, real estate and related services were, and still are, considered essential businesses and the contracts and listings that were already in place stayed intact. The Lawrence Board of Realtors shifted quickly to prioritize public and member safety. As President of the Board, I helped in our efforts to inform our members and the public about the continually changing situation. All in-person Board functions were suspended. We went virtual!
Open house activity came to a complete halt, and most agents configured their own showing and safety protocols with masks, sanitizer, and distancing. Usually, it's good practice to only schedule showings for buyers that are pre-approved. From the onset of the shutdowns, safety protocols dictated that only pre-approved buyers be allowed to view listings in person. Many listing agents decided to make use of virtual tours for all their listings.
The effect of all this was a further acceleration of trends we were already seeing in the real estate world. Electronic signatures, utilization of cloud services and remote working, paperless transactions, and the use of websites and smartphone apps for home searching are not new, but now their adoption has now become nearly universal. Many in the title services world had already been pioneering remote notary and remote closings. These services were solidified in 2020 and are now widespread.
The market reacted as well. Mostly, it accelerated the trends that were already it place for the past few years. It just kind of put them into overdrive! Listing activity was down, yet more houses were sold in 2020 than 2019. Lawrence saw the 3rd consecutive year of double-digit percentage increases in average home price. Housing inventory reached an all-time low, dropping all the way down to 1 month of supply! The median days-on-market has dropped to an astounding low of just 4 days! We were already firmly in a "Seller's Market" and 2020 pushed this to the extreme.
A common theme for 2020 was one that's certainly not unique to real estate, and that's remote working. Realtors have already been able to remotely work for years, for the most part. Anything that can be done at a physical office can be done at home, at the client's very own house, or even at the local coffee shop! Building costs are arguably one the things that justify the price of real estate commissions. Because we are completely paperless and able to work from anywhere, R+K Real Estate was able to adapt to this situation with ease. I'd already been paperless for years!
Looking to the future, I think that there are profound effects from the current Pandemic that will last well beyond it. Agents will continue to transition to a more paperless, and more remote working environment. This will further change discussions about where an agent hangs their license. We have been seeing a lot of movement of agents to companies that promote remote working and don't rely as heavily on physical office space and paid staff. Brokerages that offer more competitive commission splits and more freedom to their Realtor agents are likely to come out ahead.
Housing affordability will be greatly impacted. As we've seen with a tightening of the market to a very strong "Seller's Market," prices will continue to rise and inventory will continue to be painfully low. Skyrocketing building costs continue to lift the price of new construction. The jobs market for trades is in great shape, but a labor shortage and rising costs are bad news for home buyers. In Lawrence, we're quickly running out of buildable land, and the City's 2040 Horizon Plan is considered by the industry to be very anti-growth. The result will be an intensifying of the current trends, which I would compare to that of a pressure cooker. Honestly, I wish I had better news on this front, but the one good thing is that rates remain extremely low and so far they've allowed many buyers to keep up. So far, there are still more buyers today than home sellers.
So, where do we all go from here? I think it's going to be increasingly necessary for there to be strong government support for the home building and the real estate industry. There certainly does not seem to be a lack of private business working on just about every issue and coming up with solutions to continue to make transactions happen for buyers and sellers alike. I also think that the changes occurring in the real estate industry over the past 5-10 years will continue unabated. Some agents will get left behind. "Hobby agents" and those that are struggling to string together a couple of transactions a year will probably have to change, or find a new industry.
Increasingly, there has been a downward pressure on the price of real estate commissions. Like it or not, agents will be forced to compete over cost, while still providing high-level, professional service. There will be more to be said about whether an agent needs a big office space, or whether they'll chose to do their business with a company that provides more in the way of technology and versatility. In my view, competition will favor sellers and buyers more than it will favor real estate agent income. Some agents will be able to capitalize on this competition and gain an increasingly tight market share.
Quite frankly, I welcome ALL the changes that this discussion will bring! The anticipation of such change was a primary driver for me to start my own brokerage company. Change is coming, whether we like it or not, and when that change does come I want to be in my own boat in order to steer into the wave! Such change is overdue, and now it's on it's way. The Pandemic will accelerate it. It will find a foot-hold in Lawrence and when it does, like elsewhere, it will be here to stay.
This is great news for the home-selling and home-buying public! This means a great variety of choice from a great variety of real estate models. That freedom of choice and versatility is the very basis of the R+K Real Estate Solutions business model. We feel that we are helping usher in the change to our local market. We have no overhead and we pass our saving on to our clients. And we have already found that to be a very popular thing! We believe in the law of abundance and that there is room for all. We also believe in change, and adapting to change. The world has changed. Some things for the better, some for the worse. But we also believe in Lawrence! This is a strong community, and it will survive and thrive as we continue to face the Pandemic, and other challenges!