As businesses begin to reopen in San Diego after an unprecedented three months of lockdown, one huge economic bright side is that residential real estate demand was continually active with sales stable through the pandemic. Now, the demand for housing coupled with low interest rates may mean an especially strong residential sales season.
Many people assumed that with unemployment at an all-time high and talk of recession, residential real estate sales were also impacted. Not so.
According to the San Diego MLS, the bottom of the market hit the week of March 30 with 407 units under contract. By the end of April the numbers were rising with 619 units under contract.
One of the larger real estate firms seeing the strength of this market is Pacific Sotheby’s International Realty. Locally owned and operated since 2010, Pacific Sotheby’s has offices in San Diego County, Orange County, and the Coachella Valley. The firm recorded 170 new listings and 312 units sold for $421 million in sales for May alone.
Supporting more than 900 agents company-wide, the company is a dominant real estate firm in San Diego. The San Diego Business Journal recently had a chance to talk about today’s market and the future of residential real estate with both CEO Brian Arrington and COO Wendy Purvey.
First, why (did you join/start) Pacific Sotheby’s International Realty?
Arrington: Before starting Pacific Sotheby’s International Realty, I owned another real estate company in San Diego. While they were a well-known brand, they offered very little in terms of resources, marketing, and support for our agents. When the opportunity arose to become part of the Sotheby’s International Realty network, it was a game-changer. The benefits that the Sotheby’s International Realty brand provides are unmatched. As part of the top luxury real estate brand in the world, Pacific Sotheby’s International Realty has access to a highly-qualified global clientele through exclusive channels and relationships, worldwide exposure, and reach for our listings, as well as a broker-to-broker referral network that augments the deep personal networks of our sales associates.
Purvey: After serving as Sotheby’s International Realty’s Global Chief Marketing Officer since it began in 2004, I left to get involved in a start-up in Boulder, Colorado and after a few years realized how much I missed real estate and the extraordinary brand that I helped build. I started a consulting business and landed an exciting opportunity with Pacific Sotheby’s International Realty. Not only did I see Brian’s vision for the firm but I started my career in Southern California and was happy to be back. Together, along with a seasoned leadership team, Brian and I have pivoted to meet the many changes we are now facing (some of which are very positive) and are recreating the way our agents do business and serve their clients.
Why do you think that the demand for residential real estate will be so high as the state opens up after COVID-19?
Arrington: Before COVID-19, our market was extremely competitive, and in many cases, we saw multiple buyers fighting for properties. Those buyers who lost out, remain active in the market. The fundamentals of the economy remain sound, and COVID-19 hasn’t changed that; it merely hit the pause button. As we return to normalcy, some sectors of the economy will struggle; however, real estate will be strong and will lead this country out of the COVID-19 recession. In San Diego, inventory remains low and demand high resulting in a competitive real estate market. We have seen a continued and consistent rise in mortgage applications week over week since early April. Sellers are already seeing well-qualified and highly motivated buyers making offers, and we expect this will only increase as the state continues to open. Home prices have not lost any steam and are unlikely to fall, given the lack of inventory. As more companies open to the concept of having employees work remotely, home is becoming increasingly important. Millennial buyers are embracing the technology that allows them to work more remotely, creating demand in many of our suburban and coastal markets. Additionally, we’re starting to see this large transfer of wealth from the baby boomers to their children. That’s going to be a driver in allowing them to move up the property ladder.
Pacific Sotheby’s experienced a strong first quarter despite COVID-19 affecting the last month. What do you think accounted for the continued increase?
Arrington: The start of 2020 provided all the underlying fundamentals for one of the strongest real estate markets in years. Record low interest rates, record low unemployment, sky-high consumer confidence, low inventory all contributed to our robust first quarter of 2020. The stay at home orders surrounding the COVID-19 health crisis occurred mid-March, so it did not have a significant impact on sales until April. Even then, while business slowed, it never stopped. We had several listings that had multiple all-cash offers and ultimately sold for over the asking price.
With the fluctuations in the stock market and rumors of a recession, why are you so optimistic about local home sales?
Arrington: The stock market is a reflection of consumer confidence, and consumer confidence was shaken with this virus. Confidence is returning, and we’ve seen the market rally over the last two weeks. Real estate is one of the most stable investments a person can make, with the fluctuations in the stock market, we see more people wanting to move their money into the housing market. The potential recession was not caused by a bubble economy, financial crisis, inflation, or bad business policies but as a direct result of businesses that were temporarily forced to shut down in response to an unprecedented health crisis. An incredible amount of liquidity has been injected into the economy. The Fed has slashed rates, and the government stepped in to assist both businesses and individuals experiencing financial hardship, helping to bridge the gap for many to remain in business. As we begin to emerge from the crisis and re-open the economy, the same consumer confidence that existed before COVID-19 is returning. Interest rates remain low, allowing buyers more opportunity to enter the market.
Purvey: One of the side-effects of the COVID-19 health crisis was that many businesses and individuals were able to utilize available technologies to keep their business productive remotely. This shed light on the advantages of working from home, including more time spent with family, less time and costs spent on daily commutes and increased collaboration and communication with co-workers. One thing is sure, in our new “normal” our homes will become more important than ever, and that is why we are so optimistic about the market.
What kind of opportunities are there right now for both sellers and buyers?
Arrington: There are tremendous opportunities for both sellers and buyers. Again this goes back to the fact that inventory remains low, home values remain high, and sellers are seeing well-qualified and highly motivated buyers confidently making offers. Low interest rates are enabling buyers to qualify for more. Sellers are getting higher sales prices for their homes, allowing them to ‘move up.’ Additionally, non-qualified mortgage products, such as bank statement loans, asset depletion loans, and cross-collateral loans and adjustable-rate loans to $5,000,000, are slowly returning, bringing more buyers back into the market.
What does Pacific Sotheby’s do that is different from other real estate companies?
Purvey: As a locally-owned and operated company that is part of the top luxury real estate brand in the world, Pacific Sotheby’s International Realty provides our clients and our agents with unique and exclusive opportunities with which no other real estate firm in San Diego can compete. The exposure and worldwide reach of our listings is a critical differentiator from the rest of the industry. Pacific Sotheby’s International Realty is the only real estate company in San Diego that provides access to a highly-qualified global clientele through exclusive channels and relationships that include the most relevant and authoritative news, lifestyle, and financial media, as well as real estate centric websites – carefully selected for their ability to drive the online consumer to our property listings. The Sotheby’s International Realty brand has offices in the most significant markets in the world. These markets act as catalysts in generating sales traffic for one another. Our broker-to-broker referral network augments the deep personal networks of our sales associates. Sellers benefit from the added opportunities to find buyers through the referral network. Additionally, through our association with the Sotheby’s auction house, we have access to some of the wealthiest people in the world and are their exclusive representatives for their real estate needs.
Arrington: We pride ourselves on being a purpose-driven, performance-oriented, and principles-led organization. It’s that simple. We believe in our agents. We believe in our brand. Our strategy is quality. We are focused on increasing our agents’ productivity and creating a culture where they are supported by the tools, resources, management, and leadership necessary to take their business to the next level.
What will be different about residential real estate transactions post-COVID-19?
Purvey: The real estate industry as a whole was already positioned to utilizing virtual tools, allowing businesses to continue with little interruption quickly. As an international company, Pacific Sotheby’s International Realty already offered a host of virtual and online tools to bring buyers and sellers together and close deals remotely. If there can be any silver linings that come from the COVID-19 crisis, it is that we have learned to utilize available technology to connect and collaborate with our agents and clients in a more consistent and meaningful way. In the post-COVID-19 world, continuing to utilize tools like Zoom and FaceTime, Virtual Home Tours and online ancillary services like mortgage, title, and escrow, will only make the process of home buying and selling more efficient for our clients.
Are the lower mortgage rates bringing more buyers into the market?
Arrington: Yes. There are tremendous financing opportunities for well-qualified, entry-level, and mid-range buyers here in San Diego. According to our mortgage partner, San Diego Funding, lower interest rates are enabling buyers to qualify for larger loans. For example, in 2019, when rates were at 4%, the monthly payment on a 30-year fixed loan of $700,000 was $3,342. Today, with rates closer to 3.25%, the monthly payment on a 30-year fixed loan of $700,000 is $3,046, about $290 per month less than a year ago. Even with housing prices continuing to rise, buyers are finding they can qualify to purchase.
What does the long term future look like for both San Diego sellers and buyers?
Arrington: I am incredibly bullish on Southern California real estate. Homeownership has and always will be one of the most stable investments in the United States. Real estate is the foundation of our economy here in San Diego, and it will lead us out of this current situation.
Brian Arrington is the founder and chief executive officer of Pacific Sotheby’s International Realty. He directs the company’s strategy and oversees operations and management. He began his career in real estate in 1991 as a loan officer for San Diego Funding, his family’s mortgage banking company. In 2006, he opened his first real estate office in San Diego and business quickly expanded. In 2010, Arrington acquired the Sotheby’s International Realty brand for San Diego. Pacific Sotheby’s International Realty quickly grew into one of the most dominant real estate firms in San Diego. In 2018, the company expanded its reach by acquiring the Sotheby’s International Realty affiliation in Orange County and the Coachella Valley markets, allowing for contiguous service territory throughout Southern California, representing over 120 miles of prime coastal real estate and the expanding Desert markets. Arrington resides in Point Loma and enjoys spending time with his family enjoying the many outdoor activities his community offers.
Wendy Purvey, is chief operating officer for Pacific Sotheby’s International Realty. As a strategic and performance-focused executive, Purvey has years of expertise as an innovative, energetic leader in real estate marketing and business development across many brands, including franchise and company-owned firms. She has earned a reputation for delivering marketing strategies that have helped drive new business growth. As Chief Marketing Officer for the Sotheby’s International Realty brand for 12 years, Purvey directed the creation, development, and implementation for all marketing, digital and print advertising, social media content, and public relations for its network of international franchisees. During her tenure, she was integral in the brand’s positioning as the global leader in residential real estate and the network’s rapid growth into 70 countries with now nearly 1,000 offices generating over $100 billion in annual sales volume. She has been with Pacific Sotheby’s International Realty since 2019, working alongside CEO Brian Arrington to restructure the company’s internal operations and reposition it for continued growth in the industry. She is responsible for curating strategic plans to support the company’s growth initiatives, agent retention, competitive analysis, lead generation, networking, marketing, technology, with her primary goal helping agents increase their sales productivity.