By Katy McLaughlin

Real estate is a local industry and, as a rule, varies widely from market to market. But when Covid detonated in March, even that constant was upturned: For two weeks or more, deals everywhere fell apart, closings were delayed, buyers didn't shop and sellers wouldn't let them in anyway.

We worked with the data team at Realtor.com to find out what happened next. ( News Corp, owner of The Wall Street Journal, also operates Realtor.com under license from the National Association of Realtors.) The first step was for Realtor.com to analyze closed sales of homes at $1 million and up to find the 10 top buyer's and seller's markets nationwide. This process means that there is about a four-month lag between the home sales data and this guide, because it can take months for all of the counties to register the deeds in the public record.

Normally, that lag isn't a big obstacle to understanding current conditions: Market dynamics tend to turn like slow-moving ocean liners. But this year was anything but normal. In some of our markets, the patterns observed in the Realtor.com data changed so dramatically throughout the summer that agents were reporting the exact opposite conditions once they were interviewed in the fall.

To find out what is happening on the ground now, we interviewed over 50 agents and buyers in these markets. We also tapped Zillow for a list of the metro regions attracting the greatest number of luxury home searches by people who live in another region to give us a sense of where buyers are likeliest to flock next.

The result is The Wall Street Journal's second annual Buyers Guide, a data-driven report on market conditions rich with advice from insiders on how to negotiate during this strange time.

Seller's Market

What is a seller's market?

-- The market has more demand than supply, with low levels of inventory and a high absorption rate.

-- Sales prices in the top 5% of the market are growing at or above 4% year over year.

-- Positive yearly percentage change in both $1 million sales and absorption rates.

-- Realtor.com analyzed data from April to the end of June 2020, in markets with at least 30 monthly listings on average and at least three monthly $1 million sales.

Liz Lawson and Reed Kowit lived in Los Angeles for 10 years and fit right in. Ms. Lawson, 40, was busy as the music supervisor on a roster of television shows, and Mr. Kowit wrote screenplays and worked in production. Then Covid hit. Suddenly, their work evaporated, their 3-year-old son was isolated, and they wanted to be closer to their families, said Ms. Lawson.

Their target area: Arlington and Fairfax County, Va., which is the top seller's market in the country. In some ZIP Codes, over 40% of homes above $1 million are purchased within one month of listing, according to Realtor.com's data. The region is so hot, it occupies both the first and second top spots in the study, with nearby Alexandria City coming up as the next strongest seller's market. The couple's real-estate agent, John Eric of Compass, issued a warning.

"He told us it was a really hot market and to be prepared for it to be competitive," said Ms. Lawson, who now works as the author of young adult novels.

"The impact of Covid has seen a massive influx of buyers from around the country in our market," Mr. Eric said, citing Los Angeles, San Francisco, and New York City as primary feeder cities. Some parts of the region have been seller's markets for several years, driven by demand from workers in government and technology jobs. Between April and June, demand for homes in Fairfax County, Falls Church, Arlington County and Alexandria City grew, according to Mr. Eric and other agents in the market, and has only intensified since.

Ms. Lawson and Mr. Kowit flew across the country in May and looked at homes, soon landing on a 5,000-square-foot, five-bedroom white farmhouse under construction and listed for $1.799 million in a part of Falls Church that lies within Fairfax County. Because it had another offer, Mr. Eric advised the couple of proffer their "best and final," which was $1.85 million in cash, with no design changes required. They got the home, which should be finished by early December.

Several of the top seller's markets on Realtor.com's list bear similarities to the region Ms. Lawson and Mr. Kowit coveted: They are suburban areas close to big employment centers that offer larger homes and lots and where new construction, home offices and pools are in high demand.

Another such area is Essex County, Mass., north of Boston, where agents say demand has skyrocketed for luxury homes with beach access or water views. Syndi Zaiger of Nest Compass said that while "it's often difficult to sell homes of $3 million and up," times have changed. She had clients who got into a bidding war in July for a Manchester-by-the-Sea home listed for $2.949 million. The couple, who were about to get married, ended up getting it by offering the full asking price and no contingencies -- not even a home inspection, Ms. Zaiger said. The fiancé then put his own home on the market, had his first showing the Thursday before Labor Day weekend, got two offers and went into contract that weekend for $1.77 million -- slightly below his $1.79 million asking price.

In Riverside County, about an hour east of Los Angeles, the late spring, summer, and fall boom took some agents by surprise. Rob Murray, owner of Crest Sotheby's International Realty who also owns an escrow company, said that in late March until about mid-April, 15% to 20% of his escrows cancelled as deals fell apart and sellers took properties off the market. The market remained subdued throughout April and Mr. Murray steeled himself for major correction.

"I was dead wrong," Mr. Murray said. Around May, he started to notice an influx of buyers and bizarrely high prices paid for homes that had been on the market for months and sometimes years.

One of Mr. Murray's listings, a 7,845-square-foot, seven-bedroom hillside Mediterranean that had been listed for two years and was offered at $1.695 million, sold for $1.9 million. The buyers, who closed in mid-September, were Dwight and Luz Wilcox. Mr. Wilcox said they had lost out on a house in May, because it took the couple -- who co-own a trucking company and two insurance companies -- too long to get preapproved for a jumbo loan. When Mr. Wilcox saw his current home, he was determined to beat out any competitors, which led him to bid $205,000 above the asking price.

Buyer's Market

What is a buyer's market?

-- The market has more supply than demand, with high levels of inventory and relatively low levels of sales.

-- Luxury sales prices -- the top 5% of the market -- were growing less than 1% or declining year over year.

-- Negative year-over-year percentage change in both $1 million sales and absorption rates

-- Markets have at least 30 monthly listings on average and at least one monthly $1 million sale.

-- Realtor.com analyzed closed sales from April and June 30, 2020.

Chandler Rapson, a 48-year-old private-equity investor and entrepreneur, sold one of his companies and was ready to buy his family the dream home they'd always wanted. His wife Roslyn had her eye on $2 million to $4 million homes in Hillsborough County, Fla., which is on the seller's market list. But Mr. Rapson smelled opportunity in one of the top buyer's markets on the list: Pinellas County.

Clearwater and Clearwater Beach, like much of Pinellas County's real-estate market, were hard hit by the Covid crisis, said Michael Wyckoff, managing broker for Engel & Völkers Madeira Beach. In Mr. Wyckoff's words, the Pinellas market "went into the fetal position" -- from March through June. Whole categories of buyers disappeared: Canadians -- once 10% to 15% of the buyer pool, Mr. Wyckoff estimated -- were unable to cross the border, and snowbirds from Michigan, Ohio, Illinois and upstate New York sheltered in place at home.

Since then, things have picked up, numerous agents in the area agreed. But the house Mr. Rapson spotted this summer was a 5,300-square-foot colonial-style waterfront home in Clearwater that was lingering on the market. It had originally been listed in mid-2019 for $1.6 million, but because it was outdated, buyers were turned off, Mr. Wyckoff said. Mr. Rapson estimated it needed about $500,000 to turn it into a true contemporary luxury home.

"I offered $1 million and I said 'you have 24 hours to take it or leave it,'" Mr. Rapson said. The seller came back asking for $1.1 million. The deal closed at the end of August.

Some counties that rank high on the buyers list have been that way for a while, as non-Covid factors, such as an oversupply of luxury product, were degassing the market long before Covid hit. New York City and commuter areas in New Jersey experienced this, and then got a double-whammy in the form of the worst regional health crisis of the pandemic.

Since March, buyers have been getting major discounts, said Megha Moza, an agent with Prominent Properties Sotheby's International Realty. Ms. Moza said one of her buyer clients had agreed to pay $1.1 million for a Weehawken, N.J., condo in April. Offers in this market are made verbally, so it hadn't been committed to paper. As the virus crisis wore on, her buyer decided he didn't want the property unless he could reduce his bid to $1.07 million, which was accepted. The deal closed in July.

Other clients have received unprecedented incentives from builders, she said. For example, in March, a client who bid $1.3 million for a Jersey City condo got a free storage space, closing costs and a year of waived homeowner association fees -- a package worth $100,000, Ms. Moza said.

"The developer doesn't want to reduce the price that can be seen by the public. But they will offer incentives," to close a deal, she said.

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10-29-20 1240ET