Demand for San Diego County homes has waned in recent weeks as the fallout from the coronavirus pandemic ripples through the real estate industry.
The number of pending sales in the county has dropped by 27 percent in two weeks, said data from Reports on Housing released late Tuesday. Also, the average time on market for a home has increased from 46 to 66 days.
Besides anecdotal reports from real estate agents, the information from Reports on Housing is the first evidence that San Diego County is experiencing any downturn.
Analysts have been split so far on what it could mean for the expensive San Diego market. On one hand, it would seem a global pandemic where there is a concern about dying or losing employment would halt buyer interest. But, the San Diego market also has high demand with a very small pool of homes for sale.
For instance, the San Diego County market has seen the number of homes for sale increase by 210 in the last two weeks. However, that still makes it 5,018 listed compared to 6,751 at the same time last year.
San Diego is still a seller’s market, especially on the low end of prices, said Steven Thomas of Reports on Housing.
Homes under $750,000 still make up more than half the sales in San Diego County and stay on the market an average 48 days. But, the time it takes to sell increases as prices go up.
Homes from $750,000 to $1 million stay an average of 70 days; $1 million to $1.25 million, 99 days; $1.25 million to $1.5 million, 108 days; $1.5 million to $2 million, 163 days; and $2 million to $4 million, 299 days.
The luxury market is possibly the hardest to sell. Homes $4 million and up take an average 791 days to sell.
Samantha O’Brien, a real estate agent with PorchLight in University Heights, said she has seen a slow down with some buyers but not all. “All of my hot buyers are still looking,” she said. “But, my buyers that were lukewarm, that weren’t in a hurry, are not as keen to look right now.”
Still, at the lower end of the market, things haven’t changed much where it is still competitive. O’Brien said she has been working with a buyer that keeps getting offers rejected.
They put in a $470,000 offer Monday for a Chula Vista townhouse listed for $439,000. She said they were competing with six to seven other buyers, and her client’s offer — considerably over asking price — still got rejected.
“You can still feel the lack of inventory for your serious buyers,” she said.
Probably thanks to many bank and federal programs, foreclosures have not increased in San Diego County recently. There were 27 foreclosures and nine short sales available to purchase Monday — eight fewer distressed homes available than the same time last year.
The median home price was $587,000 in February and March numbers should be available in two weeks. Thomas said he did not think prices would fall as they did during the Great Recession because the supply of homes is so much lower and credit requirements were much stricter this time around.
Link to U-T Article
I don’t see how tighter lending conditions can maintain higher prices.
https://www.cnbc.com/2020/04/11/jpmorgan-chase-to-raise-mortgage-borrowing-standards-as-economic-outlook-darkens.html
They don’t have much presence in the SD County purchase market, and I doubt they were funding many jumbo loans to borrowers with FICOs under 700. They are buried with refinances, and they might just be buying time:
“Due to the economic uncertainty, we are making temporary changes that will allow us to more closely focus on serving our existing customers,” Amy Bonitatibus, chief marketing officer for JPMorgan Chase’s home lending business, told Reuters.
But yes, it seems every buyer who wants a jumbo mortgage will be putting 20% down.
For May the demand will collapse. The housing market is alive on momentum from before the shelter in place order.
Tighter lending standards are not intended to maintain home price levels they are intended to protect the lender from loan default. This will reduce the number of buyers that can qualify and have a sufficient deposit.
This is a sign the banks are expecting defaults, otherwise they would leave the spigot open.
I think the demand collapsed two weeks ago, and the only sales we’ll have over the next 2-3 months will be those by agents who can handle a buyers’ market.
This is a sign the banks are expecting defaults, otherwise they would leave the spigot open.
You can still get jumbo loans with 15% or 20% down payments, so it feels more like a slight pullback than a panic move. An extra 5% or 10% down isn’t going to stop people from defaulting.
Yes, more of a cautionary pullback – not only from current happenings but banks were completely bogged down by refis. They started increasing rates prior to quarantine to buy some time to get their heads above water.
Banks all-in-all were ready and well positioned for this. They are not in panic mode. Will they move into panic mode…..only time will tell. Right now they are not.
“An extra 5% or 10% down isn’t going to stop people from defaulting.“
I’ve seen studies that say the opposite.
Let’s see them. If they were done by ivory-tower types they don’t qualify.
Anybody who defaults on a house they just bought with $100,000+ down must be going through a financial disaster.
I must have understood then. Though you meant that extra down payment didn’t stop default.
Thought*
I must have understood then. Though you meant that extra down payment didn’t stop default.
OK, I think we are seeing it the same way then, I just didn’t write my response clearly. If people have a financial meltdown, they are going to default regardless of the down payment – but it would have to be a really major meltdown. The vast majority of buyers will find a way to save the house and not default, regardless of whether it was a 10%, 15%, or 20% down payment.
Let’s mention that none of these big banks have changed their Fannie/Freddie requirements and are still happy to fund 3% down deals today because they can sell them immediately. They must want some insurance (more down payment) in case they want to sell their jumbos to investors.
How I see it: the higher the down payment, the more likely the owner is to hang on for dear life. And the banks know it. So if there’s any chance they have to hold the mortgage, they’re going to demand more skin in the game.
Agree, and it looks like Chase did back down on their Fannie/Freddie loans too, and are now requiring 20% down on loans bought from correspondents:
https://drive.google.com/file/d/1RdK5SpgkVoVNcPGJk9nhhXs5vojz3v5-/view