There’s no sugarcoating it. The last couple of months have been hard.
But we’re starting to see the light at the end of the tunnel. Slowly but surely, life (and business) is returning to some level of normal.
There is, however, one big piece of the market that’s still playing catch up. The sellers that were ready to list back in March are holding off, putting extra pressure on an already stressed inventory situation.
The good news is: the summer market is heating up, buyer traffic is increasing, and mortgage rates are at historic lows.
Here are some of the key points in the housing and overall economy:
Buyers save big with low rates: Low rates create tremendous savings for potential homebuyers. After peaking at nearly 5% at the beginning of 2019, rates have fallen consistently and now sit at all-time low levels. The payment on the median priced home is roughly $300 per month cheaper than it was at this time last year. The decision to buy is always person-specific, but if their job is secure and they can afford the home they want to purchase, then this is an incredible opportunity to save money over the long term.
Homes selling quickly: Although the economy has been severely impacted, the housing market has seen significant reductions in the amount of inventory being added to the MLS. As such, the homes that are available for sale (particularly as demand has increased over the past month) have been selling quickly—a median of 17 days in May—and sellers got close to asking price in May (99.7%) and more if the home is priced right and in good condition.
Expected market time (as of 6/18/2020) by county:
- LA County - 55 Days (Seller’s Market)
- Orange County - 52 Days (Seller’s Market)
- Riverside County - 39 Days (Hot Seller’s Market)
- San Bernardino County - 37 Days (Hot Seller’s Market)
- San Diego County - 39 Days (Hot Seller’s Market)
Retail sales show consumers coming back sharply: The major macroeconomic indicator released this week was retail sales, which (after stripping away food and autos) rebounded to within 1.5% of its 2019 levels. Auto sales have been slower to come back, so overall retail sales were still down roughly 6% from May 2019, but this marks significant progress from the largest-ever drops recorded in March and April. Especially given that the U.S. economy remains roughly 70% consumer driven, this is a positive sign for overall economic growth recovering.
Unemployment remains high and will take time to heal: The number of new unemployment insurance claims continues to fall, reaching just 1.5 million last week. However, continuing claims remain stubbornly high and will take time to recover fully. In addition, the multiplier effects of these lost jobs and incomes will continue to weigh on the overall economic recovery. Thus, even as things gradually continue to improve, it will take a while for us to reach a full recovery.
California’s supply problem rears its ugly head again: Unlike pending sales, mortgage applications, or requests by homebuyers for private showings, the number of new listings being added to the MLS each week has yet to reach pre-crisis levels, let alone 2019 levels. We observed a much bigger pullback on the seller side of the market during the initial shelter in place, and we have seen a much slower rebound than we have enjoyed on the buyer demand side. As such, the number of homes available for sale fell by the largest percentage in many years, which will also limit the pace of the recovery. Today we are at the lowest inventory levels since June of 2013!
More positive indicators were released this week and suggest the worst of the immediate crisis is behind us and that things should gradually continue to improve. Americans are feeling confident that the real estate industry is strong and relatively unaffected by the economic downturn caused by the pandemic. Coupled with strong buyer demand, those choosing to sell right now are in a great position to sell quickly and for a good price.
If you have specific questions about your market or home, give us a call today. We’d love to help you any way we can!