How SoCal's Housing Market Is Reacting To COVID-19
As Californians we continue to be leaders in the nation when it comes to first in first out. We've lived by this historically as markets have changed, CA is usually the first to experience cycles and first to exit. We've seen this not only economically we're also seeing this mixed in with this Pandemic. As we near the peak here in CA sooner than the rest of most of the country, we're getting closer to recovery. REMINDER, this is not our typical market slow down, this is a forced shut down due to the Covid-19 outbreak. Historically, we've seen some of the best numbers we've seen since 2012 in housing to start the year. Question is, where does housing go from here? First as you see the chart below, it is all about Supply vs Demand. We should not see a major dip in home prices due to this age old rule. Although you see the available active listings on the below chart drop off by 42% compared to last year, meaning there is 42% less available homes for sale. We're seeing demand with a similar effect.
We use the term "Demand" as a way to label the amount of opened escrows, meaning people purchasing properties RIGHT NOW. Over the last 2 weeks in SoCal, we've seen over 9,400 homes go into escrow. Comparing this to last year the same timeframe we saw 16,000. That's over a 45% drop in demand. Which equates to what you see below which is the expected market time increasing. Meaning homes are staying on the market understandably a bit longer.
As we tie everything together, you see by the blue line below we are still in a Sellers market, and slowly inching towards a balanced market(between 90-120 days expected market time) that favors no one. In order for us to see housing prices in SoCal drop, we would have to have an estimated time on market of over 155 days(a buyers market), as well as active listing inventory to shoot up to over 75,000. Essentially doubling the market time from where we are now.
A major reason why we probably won't see this happen and see prices drop significantly is due to how low interest rates(Average mortgage interest rate since 1970 has been 8.25%) still are along with the overall shortage of property in California as a whole. It's been said by state officials that California is short roughly 1 million housing units since 2010. In addition we should not see a flood of foreclosures hit the market as we've had extremely sturdy loans offered to buyers unlike what was offered that caused the great recession.
As Supply and Demand continues to battle it out, we will keep you updated along the way. Feel free to join us below for available multiple live digital discussions coming this week.