SoCal Housing Market Update (May 11, 2020)
After reaching a low two weeks ago, Southern California had dropped to inherent, natural demand last seen during the start to the Great Recession. Yet, in the past couple of weeks a change was afoot. Reports from the real estate trenches of increased showings and buyers writing offers again were repeated all over SoCal. Buyers are figuring out that they can still purchase a home in the middle of California’s “stay at home” order.
The real estate industry has adapted to selling homes in this new COVID-19 environment. Buyers view properties wearing protective face masks and disposable, rubber gloves while respecting proper social distancing protocol. Everything else is done electronically, from a list of properties to a comparable market analysis to real estate contracts that grant buyers permission to view and purchase properties. As a result, it is not surprising that Expected Market Time has leveled off after increasing considerably since Covid -19. As you can see compared to last year we are still up on Expected Market 76 Days(This Time Last Year) vs 105 Days (Today).
With demand now increasing at a faster pace than the supply of homes, the Expected Market Time (the amount of time from hammering in the FOR SALE sign to opening escrow down the road), is now in the realm of a Balanced Market (expected market time landing between 90 and 120 days). A Balanced Market does not favor buyers or sellers and home values do not change much at all. We should see this as the market continues to progress back towards a Sellers Market.
For buyers in Southern California, the current environment may prove to be the best time to jump on purchasing a home given that there is no rush to act immediately and rates are at all-time lows. That may change as California’s economy is slowly opened back up. Even so, it will not be business as usual. The new adaptation to selling homes in this COVID-19 environment will continue.
The market may not be firing on all cylinders like it was in February and the start of March when homes were flying off the market and obtaining multiple offers, but it is starting to turn a corner with both demand on the rise and the Expected Market Time falling for the first time in a couple of months.
Active Inventory: The current active inventory increased by 3% in the past two-weeks.
The active listing inventory increased by 794 homes in the past two-weeks, up 3%, and now sits at 30,029. It is the largest increase so far this year. Yet, the current level is at the lowest level for this time of the year since 2013. There are still not that many homes on the market as COVID-19 is suppressing the number of homeowners entering the fray. In the past 4-weeks, there were 54% fewer new FOR SALE signs compared to the prior 5-year average. Expect this to continue until the economy is reopened down the road.
Last year at this time, there were 42,554 homes on the market, 12,535 more than today(30,029), a 42% difference. There were a lot more choices for buyers last year.
It appears as if the shock of COVID-19 and its impact on demand bottomed two weeks ago and is now on the rise. Expect market time to continue to drop moving forward, especially with the added incentive of record low mortgage rates. In fact, they reached an all-time low last week, dropping to an average of 3.23% across the country. With lower rates, homes become much more affordable.
For example, in looking at a $700,000 mortgage, the monthly payment at 3.25% is $3,046 per month. That is a $712 per month savings, or $8,544 per year, compared to where rates were in November 2018, just a year-and-a-half ago. The savings are staggering, which helps explain why demand is starting to rise. It is hard to ignore the impact on affordability as rates hit these unprecedented levels
