U.S real estate has started feeling the effects of the COVID-19 pandemic. Soaring home prices is the latest tailwind to hit the sector, which has so far remained resilient amid the challenging macro environment. Likewise, home sales contracted for the first time in more than six months as dwindling supply triggered a surge in prices.
Home Sales Drop
A decline in home sales marks the first time in months of strong buying. The contraction could as well signal home sales have peaked, and a correction could be imminent. Homebuilders have struggled to boost supply amid the COVID-19 disruptions, all but triggering low supply, thus higher prices which very few people can meet.
Existing home sales were down by 2.5% in November to an annual rate of 6.69 million homes against the 6.7 million projected by economists. For the first time, all the four regions saw sales decline or hold steady, with the south recording the biggest drop. However, sales in the region remain nearly 26% higher than last year.
Total home inventory was also down to a record low of 1.28 million. Given the strong demand, the supply could be diminished in less than 2.3 months should new supply fail to come to the market.
The boom in the real estate could be attributed to, among other things, the stimulus package that have come into play in the aftermath of the pandemic. Similarly, record lows mortgage rates has also prompted people to carry out house purchases.
Real Estate Stimulus Boost
Washington real estate companies are some of the companies that profited from the stimulus package passed to cushion the American people. Data from the U.S Small Business Administration indicate that the real estate companies were approved for a total of nearly $310 million under the Paycheck Protection Program.
Over 4,000 loans were approved for organizations in Washington real estate industry, with each receiving an average of $63,900. Some of the companies Okayed for large loans include Kidder Mathews, Martin Selig Real Estate, and John L. Scott. The state’s largest residential brokerage Windermere Real Estate Services received $1.12 million.
Qualia Capital Raise
Amid the slowdown in home sales, investments in the sector are still rife. Digital real estate startup Qualia is fresh from raising $65 million in a Series D financing round, translating to a billion-dollar-plus valuation.
Co-founded by Nate Baker, the startup seeks to digitize the home buying and selling process to make it easier for everyone. The company offers a platform that allows consumers to review and sign paperwork remotely of their homes of choice straight from their phones. The company has doubled the number of people it serves from 200 to 400 as the pandemic continues to fuel the doing of business remotely.
Thoma Bravo Acquires RealPage Inc.
Separately, a private equity firm, Thoma Bravo, has reached an agreement to acquire real estate management services and software firm RealPage Inc. The deal values the company at $10 billion and is scheduled to close in the second quarter of next year.
RealPage, which has been in business since 1998, boasts of a clientele base of more than 12,000 property company clients. Its customer base mainly includes owners and operators of apartments with more than 19 million rental units spread across North America, Europe and Asia.