Helen Brown Group

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Real Estate in the Age of Coronavirus

COVID-19 has impacted every single industry, usually for better or worse. But with real estate, the impact of the pandemic has been both better *and* worse, depending on the area of real estate you’re looking at. In today’s article, my colleague Josh Ostroski brings his deep knowledge of real estate to help us understand how our prospects who work in real estate (or who own well-placed properties) may be impacted now. ~Helen

There has been a lot of talk about real estate trends during the coronavirus pandemic. We have all heard about the urban exodus, housing prices increasing, and people working from home. I wanted to dig a little deeper to see if what we’re hearing is true or merely anecdotal and the reasons why.

The Urban Exodus

We have all heard that families are leaving cities to find more space in the suburbs. As the country was in lockdown, many people began to re-think what was important to them. With restaurants, bars closed, and shops closed, along with food delivery service expanding to more rural areas, there was less of need to be able to walk to amenities. However, according to a recent report by Zillow’s Economic Research team, they found that in most areas of the country “suburban housing markets have not strengthened at a disproportionately rapid pace compared to urban markets.”

There are some outliers, such as the Northeast, where new pending listings in urban zip codes re-accelerating more slowly than in the suburbs. “Some regions saw stronger evidence for a suburban-urban diverging trend than others. For example, in the New York City metro, home values in urban ZIP codes were decelerating in June relative to pre-COVID trends ( -0.2 pp) while suburban ZIP codes were accelerating (0.2 pp).

The same trend holds in Boston with urban home values down 0.5 percentage points and suburban homes values up 1.3 percentage points. However, this deceleration was already a trend (comparing February YoY to January YoY) in the Northeast Region overall, and the New York City metro.

Conversely, the Chicago metro area experienced the exact opposite trend with growth, decelerating in suburban areas while urban areas accelerated. And areas like Philadelphia and Miami saw accelerated growth in both regions, but more so in urban ZIP Codes.”

San Francisco is seeing a trend to becoming a buyers’ market, as inventory and days on market are up. According to Zillow’s report, “in San Francisco, list prices have fallen 4.9% year over year and inventory has risen 96% with a flood of new listings. Higher levels of inventory, up 96% year-over-year following a flood of new listings during the pandemic, are sitting on the market in the city proper, a significantly larger jump than the surrounding suburbs. In San Francisco, though, the softening is clear as sellers flood the market with their listings and buyers have not changed their pace to match.”

The markets where the largest share of renters in the center city would gain the power to buy if they looked outside city limits are San Francisco, Seattle, Washington, D.C., and Boston.

Check Out These Market Trends

Zillow: 12 mid-sized markets to watch

Realtor.com: Hottest Zip Codes

Insurify: Cities with the greatest pandemic real estate booms

Housing Price Increases

Normally in an economic crisis, housing prices drop. However, in this pandemic, prices in many locations have increased. Part of the reason is the drop in demand was matched with a drop in supply at the same time, protecting prices. Then when people began to look to move, the lack of supply has created a seller’s market, increasing prices.

Historically Low Interest Rates

Interest rates are still at an all-time low, so buying a home is more affordable. There has also been an increase in homeowners refinancing, putting themselves in a better economic situation.

Lender Standards

During the housing crisis of 2008, the use of subprime mortgages and lenient qualifications caused homeowners that were not really qualified to purchase homes out of their price range. When prices plummeted, they owed more than the house was worth (became “upside-down” or “under water” on their mortgages). Since then, the government and mortgage lenders have become much stricter in their lending qualifications. That means more homeowners are qualified now. According to CoreLogic, lenders have tightened credit requirements or increased payment requirements, making riskier loans less common. This helps to protect homeowners in a down market.

Home Wealth Gains

According to the Federal Reserve, housing wealth is a major component of total household wealth in the United States. According to the National Association of Realtors, “as of 2018, a homeowner who purchased a typical existing home five years ago (2013) gained $79,488 in wealth (equity), of which $64,200, or 81 percent was from the home price appreciation ($197,400 in 2013 to $261,600 in 2018).”

Home equity is at an all-time high in the U.S., which has not only helped weather the economic downturn, but has allowed homeowners to use that equity to their advantage by having flexibility to be able to sell their home for something that works better for them, like investing in another property (which can generate rental income), home renovation (which further increases the home value), a child’s college education, emergency or major life events, or expenses in retirement. National Association of Realtors has calculated equity reports on 181 metropolitan areas.

Default rates have also remained low during the pandemic. According to ATTOM Data Solutions, “Equity-Rich Properties Continue to Outnumber Those Seriously Under Water by Four-to-One Margin; Portion of U.S. Homes Considered Equity-Rich Ticks Up to 27.5 Percent; Seriously Under Water Properties Down to 6 Percent.”

Second Homes

Another trend that we are seeing is people are moving into their second home and using it as their primary residences. According to an article in the Colorado Sun, schools in Aspen, Vail, and Crested Butte reported record interest in enrollment as part-time resident relocated to their second homes. At the same time, the market has seen increased home sales in these resort towns as people are wanted to get away from cities.

This is also happening in New York City, which was one of the hardest hit cities by COVID-19, where people are moving into their upstate NY, Hamptons, and CT homes.

Real estate agents are also seeing an increase in people that live in cities, but are renters, buying second homes outside of the city.

As researchers, we should keep an eye on surrounding communities outside of cities that were historically vacation areas to see if there is an increase in sale prices. This could also trigger people to sell a home in a vacation area to take advantage of the increased demand.

Commercial Real Estate

One industry that is struggling is commercial real estate. As many businesses struggle to stay afloat, they have not been able to pay rent and commercial real estate companies are feeling the effects. Also, since many companies are having their employees work remotely, they are finding out they don’t need all the space they have and once their lease is up, they are either looking for smaller space or going fully remote.

Physical distancing is also changing the physical layout needed in office areas, meaning that potential tenants are going to demand less open spacing (can this mean we can finally put a nail in the open workspace concept?), updated HVAC systems, and improved amenities.

There is an increased demand for warehouse and storage space, as e-commerce has surged. Biotech companies are also seeing increased demand for lab space.

I think it would be smart to look at a commercial real estate firm’s portfolio and see what types of companies are in their portfolio. Consider using the HBG Whitepaper on who is doing well to help you determine if the RE firm has any of those clients or companies in industries that are doing well. At the same time, if the portfolio is full of restaurants or retail it could mean lean times for the commercial real estate firm.

Also, be on the lookout for commercial real estate firms to take advantage of opportunities to acquire properties at a good price and build their portfolio. Here is a good place to keep an eye on commercial real estate transactions and news.

Working Remotely

Due to the pandemic, many people were forced to work remotely. According to Business Insider, following the pandemic more than half of Americans want to continue working remotely while two-thirds of companies may render their current work-from-home policies permanent. A few major companies have announced they will continue to have employees work remotely, including Google, American Express, Uber, and Airbnb. REI plans to have its employees work remotely indefinitely and recently sold its brand new headquarters in Bellevue, WA to Facebook for $368M.

The National Association of Realtors created a Work From Home Score that studied “3,142 counties that are best poised to provide a supportive environment for working remotely, mainly, working from home.” They used nine factors to calculate the score. The top 30 work from home counties represent the top 1%. The top five counties include:

  • Forsyth County, Georgia

Part of the Atlanta-Sandy Springs-Alpharetta metropolitan area, 11.3% of the workforce already works from home and 99% of the population is served by three or more broadband internet service providers (ISPs). It’s a fast-growing area, and the population rose nearly 21% over the last five years.

  • Douglas County, Colorado

Part of the Denver-Aurora-Lakewood metropolitan area, 11.7% percent already work from home and 98% of the population is served by three or more broadband providers.

  • Los Alamos County, New Mexico

Part of the Los Alamos micropolitan area and the Albuquerque-Santa Fe-Las Vegas combined statistical area, less than 3% work from home but what stands out is that 68% of the workforce work in office-using industries. Homes are very affordable and only 11% of homeowners pay  30% or more of their income on their mortgage.

  • Collin County, Texas

Part of the Dallas-Fort Worth-Arlington metropolitan area, 8.6% of the workforce work from home, and its population expanded 17% from 2014 to 2019, indicating it is a fast-growing county.

  • Loudoun County, Virginia

Part of the Washington-Arlington-Alexandria metropolitan area, 7.5% of residents work from home, with 44% working in office-using industries. 100% of the population is served by three or more ISPs.

These areas could also be a good place to keep an eye on if you have prospects living there as they could see an increase in their property value. It is also going to change the type of home people want to purchase, which may now include two office spaces and an area that can act as a home school.

What trends are you seeing in your area?

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4 Mid-COVID tasks that get you ahead

Hi there, and welcome back to the Intelligent Edge: mid-COVID edition.

While we’re hopeful that at least one of those 50-odd vaccines in development will work – and that it really will be ready early in 2021 – that’s still half a year away.

So, now’s a good time to take realistic stock of where we’re at, see what we can do to make the most of right now, and plan as best we can to make things easier for ourselves next spring and mitigate future disruption.

From prospect development and operations perspectives, what might that mean?

Top prospect checkup

Well, first, we’re all keenly aware that the pandemic has impacted businesses – so many businesses – in a negative way. Now is a really good time to do a quick scan of your top 25-50 prospects (for large organizations, that would mean the top 25-50 in each major gift officer’s portfolio).

  • How has their financial situation changed, if at all? Recalculate ratings accordingly.
  • Is your donor in a fairly stable (or growing) industry right now? Can you code that for pulling reports?
  • Have they made any recent large gifts, either to your nonprofit or to another?
  • Do they have a donor advised fund? If so, it is noted/coded in your database?
  • Check the obituaries to see if there has been a recent death in their family (which, I know. It’s just unbelievably sad that we need to do this, but it’s important).

End-user check-in

It’s not just our donors and their companies that have been impacted. We have been, too, of course. Everybody’s needs have changed. No matter what your position, now is a good time to check in with your supervisor and other end users to be sure that the reports and information and work you’ve been producing is still helping drive things forward for them.

  • Do they need less information because concentrating on large reports is tough right now?
  • Do they need the information bulleted, or in prose, or in an audio memo, because it’s easier for them to absorb?
  • Do they need different information? Is something else about their prospects more important than it used to be?

We’re not in the same-old same-old anymore. We’ve all changed, and our needs have all changed. Check in to see how you can meet the new needs that exist.

 Data hygiene checkup

If you’re having  trouble concentrating, now is a really good time to do mindless data hygiene tasks. You know, the ones you’ve been putting off. Crank up the music and get them done.

For example: Currently in your database in the company field for 38(0)(00) of your constituents, I can say with some certainty that there are a nearly-equal number of permutations of the same company name. Goldman Sachs. Goldman Sachs Group. THE Goldman Sachs Group. Goldman. GS. GSG. Goldman Sacks.

If you fix those now when a fairly auto-pilot task is just the ticket, in the future when you want to pull a report to answer the prospecting question “hey, just how many constituents do we have that work at Goldman Sachs?” you won’t get that sinking “UGH! I have to put in 38(0)(00) different queries!” feeling.

Also, if you haven’t looked at your data entry policies (or written them at all), now is a good time to do that, so that you avoid those messy name permutations (and any other data inconsistencies) in the future.

Ethics, Due Diligence, and The Law

Was your organization affected by the Blackbaud breach? Did it catch your team flat-footed when you tried to figure out how – or if – you needed to respond or send a notification to your constituency?

Did you write down the policies and procedures you learned through that process? Do you now have someone in your organization who is responsible for managing the process and/or response when something similar happens again? If not yet, do that now.

(If you’re not a Blackbaud client, have you gotten in touch with your database vendor to find out what precautions they’re taking to avoid placing you in the same situation?)

The first lawsuits that sprang up in the Blackbaud data hijacking situation were aimed solely at the company. However it was announced this week that a new lawsuit, Cohen v. Blackbaud Inc,. also names Harvard University, Bank Street College of Education, and the Lower East Side Tenement Museum as defendants. (More information here$ and here).

There are probably more lawsuits to come. As prospect research professionals, we can help our fundraising teams stay on top of the news as it comes out.

We also tend to be the ones who are on the front lines of ethics, due diligence, and conforming with the laws that pertain to information-gathering and fundraising. These aren’t the most gripping topics, but they are important.

Can you discuss with leadership and opportunities for your team to gather for lunch-and-learns around ethics and data security? What does your team need to know to be prepared for a data breach, or to be sure you’re compliant with laws and ethics requirements?

What are you working on?

So those are just a few ideas for (actually really important) things you can do right now to stay ahead of the game and be prepared for the next few months. What are you doing right now to be prepared? Share it in the comments and bring your ideas to others!

If you want to hear more about ethics, due diligence, the law, prospect development, and how you can start those discussions in your nonprofit, join me at the APRA-MN virtual conference on October 20!

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Philanthropy is a broken puzzle. And we have to fix it.

It’s a useful exercise to think about our society as a puzzle where governments, and government-run operations, and businesses, and civic life, and religious organizations, and educational institutions and hospitals and charities and NGOs each, interdependently, make the picture of society whole.

We’re so busy trundling through each of our own parts, though, that we take the others…well, maybe not entirely for granted, but as if they’re permanent fixtures. I know that I’ve always assumed that things like restaurants and cute little shops and, you know, the post office would just always be there.

Now that COVID-19 has darkened our lives in uniquely individual ways like the fires have turned West Coast sunshine to midday night, it becomes harder for us to see each of those puzzle pieces that are farther afield. All of the everything going on in our own world obscures the picture on the box that reminds us what the integrity of the whole looks like.

We’re cut off, and it’s making us focus on our own piece and less on the whole.

As a fundraising intelligence professional, my work-life has been focused on identifying and bringing to life current and potential donors in a way that faithfully and ethically tells their story and motivates a fundraiser to begin (or continue) a relationship with that donor.

I’ve always deeply believed in the power of philanthropy and the good it does on both ends – making the world a better place and giving donors the opportunity to feel how amazing it is to do that.

And I still believe that, but if you read my article from a few weeks ago, you’ll remember that lately I’ve been concerned that prospect development has had a role to play in missing out on the next generation of donors. Not entirely, of course, and I know that our profession (and our company) is doing our part to help organizations find mid-level and future major donors quietly putting up their hands.

But still. I’m working harder than usual lately on trying to see beyond my piece.

And now that I’ve pulled the focus out a bit, I realize that there’s an even bigger picture which I’ve struggled against for over a year and tried to ignore because it’s too difficult to think about.

I know the nonprofit sector is by no means perfect. It’s hard to attract the level of talent and experience for jobs that for-profits can because nonprofit salaries are lower. Small nonprofits don’t have the bandwidth to compete with larger ones for much-needed funding. Large nonprofits are bureaucratic behemoths that have lost the ability to be nimble.

But large or small, every single nonprofit has to sing and dance for their supper. Every. single. day.

Every single day nonprofits are called on to Show Their Impact.

Be Donor-Centered.

Meet State Laws. Federal Laws. International Laws.

Every day they have to jump through ridiculous hoops to gain institutional funding that, in the end, may not even cover the cost of gaining, tracking and reporting the donation.

As a sector, we’re working really hard – really hard – with fewer people because of furloughing and permanent separations, to secure the next gift just to survive right now. And there’s just so much wealth out there.

It’s exhausting. It’s not just. And it’s not tenable.

In our time of greatest need, Chuck Collins, director of the Program on Inequality at the Institute for Policy Studies asks in his opinion piece for The Guardian, “Why aren’t the rich giving more?” Many of the philanthropists that fund nonprofits are richer than ever before – some are richer because of the pandemic. He reminds us that the wealth of members of The Giving Pledge has nearly doubled since February.

Collins writes:

 Many have stepped up to give during the pandemic. But their giving is not keeping pace with their exploding wealth.

This leads to the second problem: in all likelihood, most of what they give away won’t go to on-the-ground charities, but to private family foundations often controlled by wealthy heirs and their advisers. Instead of supporting charities on the frontlines of problem solving, these billions end up sitting in tax-advantaged intermediaries.”

The Chronicle of Philanthropy has just started a 5-part series specifically to discuss what’s next for the philanthropy sector, and I highly recommend it. I’ve long admired the work of Lucy Bernholz, director of the Digital Civil Society Lab at Stanford University’s Center on Philanthropy and Civil Society, and her article (part 3 of the series) is a barn-burner. In “Let’s Dismantle Toxic Tax Policies That Feed Big Philanthropy” Bernholz writes:

 In the United States today, a toxic tax code permeates our soil and prevents us from growing into a more equitable society. Our current tax laws starve our schools, hospitals, transit, and elder-care systems. They allow individuals to become trillionaires and corporations to pay nothing. They enable the amassing of philanthropic fortunes so large that people turn to them when government efforts fail.

For decades, these policies have concentrated financial benefits on the white ruling class while extracting wealth from low-income Black and brown people. The pandemic is the “big reveal” of the truly shared nature of these systemic inequities.”

As someone who deeply cares about our sector and who is steeped every day in understanding wealth, it’s been increasingly difficult for me during these past 6 months not to get angry and frustrated while learning about any non- (or weakly-)philanthropic individual’s increasing billions – knowing that it would require almost no sacrifice for them to significantly create lasting change for the world. Or even one piece of it. Especially when so many others are doing so much.

Nonprofits shouldn’t have to sing for their suppers. They should be funded to fill the gaps in society, and there should be fewer gaps to fill every year as we work toward a healthy republic, not more and more.

Our professional association boards and leading practitioners should take seriously what the philanthropy scholars, experts, and writers are saying now; consider the many solutions they’re offering; and join with members of congress who care about fixing this broken system. This sector is vital to making our society one that makes sure everyone – not just the wealthy – thrive. We’ve got to make it work.

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