March 24, 2020
Real Estate Market Update North County Real Estate
The real estate world before Covid-19 looked very good. Inventory was low and as we approached Spring, many sellers were getting ready to list. We had an increased number of buyers shopping earlier than we normally see, and I believe this was a function of low interest rates, increased demand for those who want to live in this area, and the desire for many to jump into a home here before the prices jumped even higher. Our first 2 ½ months of this year, both here and in the State were very active.
At the end of February this year, single family homes were on the market for an average of 38 days, and our County had 4.8 months of inventory available…a sellers market. The median list price for a North County home was $435,600.
With the strong economic growth we have been experiencing, low mortgage rates and more millennials entering their peak age for home buying, we now have more buyers looking for a home than at any time in the past five years. In fact, January 2020 was the strongest January for purchase mortgage applications in 11 years!
Last Thursday March 19 we were urged by the Governor to cease any property showings or face to face meeting with clients.
The California Association of Realtors (CAR) Today is working with the Governor’s office to have Real Estate classified as an essential service so we can continue to show houses and list properties.
It’s likely too soon to issue any real statistics to show you what is happening, but with the Shelter in Place order, and the stock market declines, most of us expect this situation to some degree to negatively affect our business. But Sellers still want to sell. And as effective as a video tour can be, it will never replace walking through a house in person. And Buyers, who see amazing interest rates under 3%, are even more interested in purchasing a home. However, with low inventory and an inability to see inside a home we are seeing fewer sales. While the 10 year Treasury may continue to drop, an accompanying drop of the 30 year fixed rate mortgage may not drop in concert with that. The prediction is that actual rates for the second half of the year will be in the 3.2 to 3.5% range.
Today, lenders are flooded with refinance requests. I know of some companies who are not accepting any more refis until they have worked through applications on hand. Let me know if you need a referral to someone who can help you right now.
On the positive side, we are seeing existing sales still moving forward, even if the appraisal has not yet occurred. The federal government guidelines have been loosened to allow appraisers to conduct a “drive by” or external only appraisals. This will be a huge help to our industry in the coming weeks.
The title and escrow companies are continuing to close transactions. One escrow officer told me today that although the office door is locked, they are allowing in one client at a time by appointment for signing and notarization of all necessary documents.
Currently CAR expects negative economic growth in this next quarter, and state that in fact, we are in the midst of a recession all ready. The slow down and it’s length is largely dependent on how long the virus lasts, and if the economy can get a “re-start” quickly enough.
In the meantime, I came across this website for all things Corona Virus. Lots of great links for real and up to date information as well as ideas for keeping you from going crazy as you “Shelter at Home”. For instance, there’s a link to “Every Oscar Best Picture Ever”.
How can I best counsel you today? First of all, please know that we are positioned to bounce back in todays market.
It may be that as a seller you will need to expect a longer marketing time as markets readjust. But know that you have not missed the window of opportunity. Although the homebuying season started early this year, it is statistically known that homes listed in May generally sell for more than other times of the year.
And as a buyer, inventory will be low until sellers once again feel comfortable enough to allow showings. Also, we need to remember that your job security is tantamount to obtaining a loan. You may be either be job hunting or in a position where you job security is tenuous. But remember that our interest rates this year are expected to remain in the low 3% range.
Will the price of homes change? Does the drop in the value of the stock market signal an accompanying drop in the prices of homes? During the past recession, when the S&P dropped 51% between 2007 and 2009, real estate prices dropped 18.6%. So no, there is not a direct correlation. A recession does not equal a housing crisis.
This change in our economy is closer to a 9/11 event than to the downturn from a recession. 9/11 produced fear, anxiety and shock in our markets. But in the three years following the 9/11 crash, homes continued to appreciate at a healthy rate. Think of it more as what happens in any part of the country that experiences a long, heavy snowstorm. Everything has to pause.
I feel that when the country begins to function normally again, the real estate market will come roaring back because of pent up demand. Goldman Sachs predicts a GDP of -5% in our 2nd quarter, a +3% in the 3rd quarter, and a +4% GDP in the 4th quarter. Beyond that, they predict even further strong gains in early 2021.
FHA is enacting an immediate foreclosure and eviction moratorium for single family homeowners for FHA insured mortgages for the next 60 days. This is a wonderful move by our government to help alleviate concerns for those homeowners living from paycheck to paycheck. We didn’t have this help back in 2008 Also, our homeowners learned something from the Great Recession and the amount of equity pulled from homes today is ¼ of what it was at the time of the Great Recession. Most people have learned that it’s a bad idea to use your home as an ATM, so financially, our country is stronger than it was 15 years ago.
Owning a home is the number one way that households without inherited wealth, gain wealth.
Affordability will continue to be a challenge, but the mortgage rate environment will be really positive. We live in a highly desirable area and the problems that the large cities have experienced in the past weeks have been felt here to a much lesser degree. People will be moving here this year. We have much to be thankful for!
I am grateful to be in this ever changing, ever challenging business and to have my clients as my friends. And I’m also grateful that as far as I know, Covid-19 has not affected the health of any of you. So stay healthy, be careful and please let me know if I can answer any real estate questions for you in the future! My phone is always ON!