California Gov. Gavin Newsom’s order marks the first statewide mandatory restrictions in the United States to help combat the outbreak. It went into effect at midnight Thursday, meaning Californians should not leave home except for essential things such as food, prescriptions, health care and commuting to jobs considered crucial.
The restrictions will remain in place until further notice and come a day after Newsom warned that more than half the state is projected to be infected by the virus in two months.
“This is a moment where we need some straight talk,” Newsom told reporters. “As individuals and as a community, we need to do more to meet this moment.”
The order will not be enforced by law enforcement, he added.
“I don’t believe the people of California need to be told through law enforcement that it’s appropriate just to home-isolate, protect themselves,” Newsom said. “We are confident that the people of the state of California will abide by it and do the right thing.”
What will it mean for our local real estate market?
Our title and escrow companies are functioning (which might be case-by-case), and the county recorder’s office is accepting documents. Those electronic filings are coming in handy now – remember our tour of the process at First American Title? Link to Youtube.
The banks are open, but that doesn’t mean that mortgage companies will be funding loans. But we should be able to close sales where the buyers are paying cash.
Sellers will be reluctant to agree to any discounts requested by buyers on deals already in escrow, so some of them will fall out. Few will close for prices that are way under market, and maybe none – sellers would rather wait and get more money later this year (which will be the common perception).
Let’s figure that most of the existing escrows will find a way to close, either now or later.
What about new deals?
Are sellers willing to price their homes so attractively that buyers will make deals based on video alone? How many listings will have a video presentation that makes buyers comfortable enough to make an offer that is close to list price? Not many.
Sales will slow to a trickle over the next month or two.
Then at some magical moment, the coronavirus threat will be declared over, and we’ll get back to it. Kayla was listening to the D-E broadcast yesterday, and Howard Lorber recalled the NYC market after 9/11. He said that Manhattan sales came to a standstill for the rest of the year, but in January 2002, their market took off like a rocket.
There will be a scramble by the pent-up buyers AND sellers who really wanted to make a deal earlier, and who will want an early piece of the action. The naysayers will somewhat-reluctantly fall in line, and we’ll be back in business.
Will sellers need to discount? Here’s a likely scenario:
Buyer: I want a discount.
Seller: No, the scare is over!
Buyer: But there are lower comps now.
Seller: The coronavirus caused those. The ‘rona is over!
Buyer: I’m only buying if you discount the price.
Seller: No problem, step aside while I wait to get my price.
Could we see a surge of inventory once the immediate threat slows? Will the scare cause more people to sell – especially the older homeowners? It’s doubtful – after sitting at home for 1-2 months straight, the older homeowners are going to give up and pack it in. To have to re-ignite the painful ideas of finding a suitable home and packing up all the stuff will be even more uncomfortable. If there is a surge of older Californians not surviving the virus, I guess you could make the case that a few more inherited properties will come to market. But probably not rushed – a flatter curve.
Could this turn out better than expected?
The politicians’ rush to overreact is understandable, and they want to be heroes in the end. The numbers in China are already subsiding – could we get lucky and our strong reactions combined with our suburban lifestyles end up minimizing the impact?
We also come into contact with fewer people when we commute. According to the 2017 American Community Survey, more than 80 percent of Americans either work from home or commute alone by car. In Beijing and X’ian, on the other hand, only 30 percent of commuters travel by car. Italians similarly use public transit much more frequently than do most Americans. A paper from the Brookings Institution says that the average resident of Milan, the epicenter of Italy’s coronavirus outbreak, takes 350 trips a year on public transit compared to 17 for the average resident of San Diego. It’s a lot easier to get sick from the sneezing person next to you on the bus than it is driving by yourself.
These data suggest why New York seems especially hard hit by the pandemic. New York is one of the most densely populated places anywhere, with nearly 28,000 people per square mile. (Even Wuhan, the Chinese city where the virus originated, has only about 3,200 people per square mile.) And most of those New Yorkers don’t drive to work; New York’s Metropolitan Transit Authority says that more than 80 percent of rush-hour commuters to the central business district in Manhattan take transit. With a few exceptions in Staten Island and the fringes of the outer boroughs, New Yorkers live, work, commute and shop in much closer proximity to other people than almost anywhere else in the United States. It’s no wonder the virus is spreading rapidly there and in the commuter suburbs.
For now, our lives will be suspended, and the real estate market will wait it out. If there are going to be any deals, they will be in the next 30 days – but don’t expect much. For sellers, it’s too easy to look ahead.
Patrick Ayescue: Leading outbreak response and surveillance. Epidemiologist.
Chaz Langelier: UCSF Infectious Disease doc
Below are essentially direct quotes from the panelists. Bracketed are the few things that are not quotes.
At this point, we are past containment. Containment is basically futile. Our containment efforts won’t reduce the number who get infected in the US.
Now we’re just trying to slow the spread, to help healthcare providers deal with the demand peak. In other words, the goal of containment is to “flatten the curve”, to lower the peak of the surge of demand that will hit healthcare providers. And to buy time, in hopes a drug can be developed.
How many in the community already have the virus? No one knows.
We are moving from containment to care.
We in the US are currently where at where Italy was a week ago. We see nothing to say we will be substantially different.
40-70% of the US population will be infected over the next 12-18 months. After that level you can start to get herd immunity. Unlike flu this is entirely novel to humans, so there is no latent immunity in the global population.
[We used their numbers to work out a guesstimate of deaths— indicating about 1.5 million Americans may die. The panelists did not disagree with our estimate. This compares to seasonal flu’s average of 50K Americans per year. Assume 50% of US population, that’s 160M people infected. With 1% mortality rate that’s 1.6M Americans die over the next 12-18 months.]
The fatality rate is in the range of 10X flu.
This assumes no drug is found effective and made available.
The death rate varies hugely by age. Over age 80 the mortality rate could be 10-15%. [See chart by age Signe found online]
Don’t know whether COVID-19 is seasonal but if it is and subsides over the summer, it is likely to roar back in fall as the 1918 flu did
I can only tell you two things definitively. Definitively it’s going to get worse before it gets better. And we’ll be dealing with this for the next year at least. Our lives are going to look different for the next year.
What should we do now? What are you doing for your family?
Appears one can be infectious before being symptomatic. We don’t know how infectious before symptomatic, but know that highest level of virus prevalence coincides with symptoms. We currently think folks are infectious 2 days before through 14 days after onset of symptoms (T-2 to T+14 onset).
How long does the virus last? On surfaces, best guess is 4-20 hours depending on surface type (maybe a few days) but still no consensus on this
The virus is very susceptible to common anti-bacterial cleaning agents: bleach, hydrogen peroxide, alcohol-based.
Avoid concerts, movies, crowded places.
We have cancelled business travel.
Do the basic hygiene, eg hand washing and avoiding touching face.
Stockpile your critical prescription medications. Many pharma supply chains run through China. Pharma companies usually hold 2-3 months of raw materials, so may run out given the disruption in China’s manufacturing.
Pneumonia shot might be helpful. Not preventative of COVID-19, but reduces your chance of being weakened, which makes COVID-19 more dangerous.
Get a flu shot next fall. Not preventative of COVID-19, but reduces your chance of being weakened, which makes COVID-19 more dangerous.
We would say “Anyone over 60 stay at home unless it’s critical”. CDC toyed with idea of saying anyone over 60 not travel on commercial airlines.
We at UCSF are moving our “at-risk” parents back from nursing homes, etc. to their own homes. Then are not letting them out of the house. The other members of the family are washing hands the moment they come in.
Three routes of infection
Hand to mouth / face
Fecal oral route
What if someone is sick?
If someone gets sick, have them stay home and socially isolate. There is very little you can do at a hospital that you couldn’t do at home. Most cases are mild. But if they are old or have lung or cardio-vascular problems, read on.
If someone gets quite sick who is old (70+) or with lung or cardio-vascular problems, take them to the ER.
There is no accepted treatment for COVID-19. The hospital will give supportive care (eg IV fluids, oxygen) to help you stay alive while your body fights the disease. ie to prevent sepsis.
If someone gets sick who is high risk (eg is both old and has lung/cardio-vascular problems), you can try to get them enrolled for “compassionate use” of Remdesivir, a drug that is in clinical trial at San Francisco General and UCSF, and in China. Need to find a doc there in order to ask to enroll. Remdesivir is an anti-viral from Gilead that showed effectiveness against MERS in primates and is being tried against COVID-19. If the trials succeed it might be available for next winter as production scales up far faster for drugs than for vaccines. [More I found online.]
Why is the fatality rate much higher for older adults?
Your immune system declines past age 50
Fatality rate tracks closely with “co-morbidity”, ie the presence of other conditions that compromise the patient’s hearth, especially respiratory or cardio-vascular illness. These conditions are higher in older adults.
Risk of pneumonia is higher in older adults.
What about testing to know if someone has COVID-19?
Bottom line, there is not enough testing capacity to be broadly useful. Here’s why.
Currently, there is no way to determine what a person has other than a PCR test. No other test can yet distinguish “COVID-19 from flu or from the other dozen respiratory bugs that are circulating”.
A Polymerase Chain Reaction (PCR) test can detect COVID-19’s RNA. However they still don’t have confidence in the test’s specificity, ie they don’t know the rate of false negatives.
The PCR test requires kits with reagents and requires clinical labs to process the kits.
While the kits are becoming available, the lab capacity is not growing.
The leading clinical lab firms, Quest and Labcore have capacity to process 1000 kits per day. For the nation.
Expanding processing capacity takes “time, space, and equipment.” And certification. ie it won’t happen soon.
UCSF and UCBerkeley have donated their research labs to process kits. But each has capacity to process only 20-40 kits per day. And are not clinically certified.
Novel test methods are on the horizon, but not here now and won’t be at any scale to be useful for the present danger.
How well is society preparing for the impact?
Local hospitals are adding capacity as we speak. UCSF’s Parnassus campus has erected “triage tents” in a parking lot. They have converted a ward to “negative pressure” which is needed to contain the virus. They are considering re-opening the shuttered Mt Zion facility.
If COVID-19 affected children then we would be seeing mass departures of families from cities. But thankfully now we know that kids are not affected.
School closures are one the biggest societal impacts. We need to be thoughtful before we close schools, especially elementary schools because of the knock-on effects. If elementary kids are not in school then some hospital staff can’t come to work, which decreases hospital capacity at a time of surging demand for hospital services.
Public Health systems are prepared to deal with short-term outbreaks that last for weeks, like an outbreak of meningitis. They do not have the capacity to sustain for outbreaks that last for months. Other solutions will have to be found.
What will we do to handle behavior changes that can last for months?
Many employees will need to make accommodations for elderly parents and those with underlying conditions and immune-suppressed.
Kids home due to school closures
[Dr. DeRisi had to leave the meeting for a call with the governor’s office. When he returned we asked what the call covered.] The epidemiological models the state is using to track and trigger action. The state is planning at what point they will take certain actions. ie what will trigger an order to cease any gatherings of over 1000 people.
Where do you find reliable news?
The John Hopkins Center for Health Security site which posts daily updates. The site says you can sign up to receive a daily newsletter on COVID-19 by email. [I tried and the page times out due to high demand. After three more tries I was successful in registering for the newsletter.]
The New York Times is good on scientific accuracy.
Observations on China
Unlike during SARS, China’s scientists are publishing openly and accurately on COVID-19.
While China’s early reports on incidence were clearly low, that seems to trace to their data management systems being overwhelmed, not to any bad intent.
Wuhan has 4.3 beds per thousand while US has 2.8 beds per thousand. Wuhan built 2 additional hospitals in 2 weeks. Even so, most patients were sent to gymnasiums to sleep on cots.
Early on no one had info on COVID-19. So China reacted in a way unique modern history, except in wartime.
Every few years there seems another: SARS, Ebola, MERS, H1N1, COVID-19. Growing strains of antibiotic resistant bacteria. Are we in the twilight of a century of medicine’s great triumph over infectious disease?
“We’ve been in a back and forth battle against viruses for a million years.”
But it would sure help if every country would shut down their wet markets.
As with many things, the worst impact of COVID-19 will likely be in the countries with the least resources, eg Africa. See article on Wired magazine on sequencing of virus from Cambodia.
The panic ensues over the coronavirus, but people want and need to move too – especially as mortgage rates climb higher. What can we do to keep the real estate market hopping?
Here’s what can we do for home sellers.
Those who are concerned about strangers coming into their house should go ahead and move to their next home first. We can give you a Compass Bridge Loan to access up to 90% of your equity in your current home to purchase your next one, and we’ll front up to $50,000 for home improvements and staging to make selling your old home more effective. Let’s go this route on every home sold – it’s easier on you!
What can we do for home buyers?
The COVID-19 might be what finally gets agents to do video tours of homes. Selling homes by video is a real possibility, and if listing agents just walked around the house with a camera like they were showing it in person, then every potential buyer could see it from the comfort of their own home. If making a film makes you queasy, have your kids do it – they have no problem with producing videos.
This could also be the chance for home auctions to take hold. After a few days go by and/or the video reaches 100+ views, then conduct an online auction to determine the winner. Then have that buyer view the home in person, keeping traffic to a minimum.
Or have buyers submit written offers after seeing the video tour, and if the seller permits, have only those contenders view the home in person. Investment properties are regularly sold this way to minimize the impact on the existing tenants – you’ve heard the phrase, “Show with offer”.
Either way would reduce human interaction and possibly make home-selling MORE effective.
Buyers don’t necessarily need to see the home in person, either.
My buyers purchased this home and closed escrow without ever stepping foot inside. We also did a video of the home inspection, and between the two, the buyers got a full experience of what they were buying – and never saw the house in person until they owned it:
Either we can adopt new and improved ways to serve our clients and keep everyone moving, or we can sit at home watching the paranoia grow on TV. It’s your choice!
From the doctor in charge of infectious diseases at Rady Children’s hospital:
Statement from FHFA Director Mark Calabria on Coronavirus
FOR IMMEDIATE RELEASE
?Washington, D.C. – “To meet the needs of borrowers who may be impacted by the coronavirus, last week Fannie Mae and Freddie Mac (“the Enterprises”) reminded mortgage servicers that hardship forbearance is an option for borrowers who are unable to make their monthly mortgage payment. For borrowers that may be experiencing a hardship, I encourage you to reach out to your servicer. The Enterprises and the Federal Home Loan Banks continue to provide support to the secondary mortgage market, and the UMBS market continues to operate at its normal level.”
The Federal Housing Finance Agency regulates Fannie Mae, Freddie Mac and the 11 Federal Home Loan Banks. These government-sponsored enterprises provide more than $6.3 trillion in funding for the U.S. mortgage markets and financial institutions.
Everyone is wondering how the coronavirus will affect housing, so Bloomberg News decided to whip up the hysteria with this article built on speculation and guesses. Mark Zandi has had one of the most negative opinions about housing, hoping that some day he might be right, and Yunnie has never left his ivory tower.
These are the only facts mentioned in the article:
The potential economic fallout still hadn’t completely registered this past weekend for homebuyers in Seattle, an epicenter of the U.S. outbreak. On Saturday, around four dozen groups filed through a four-bedroom Tudor in the Whittier neighborhood listed for just over $1 million. Many said they had hoped the virus would keep other would-be buyers away in a market where there’s little inventory and bidding wars are frequent.
At another open house nearby, handshakes were out, but plenty of home shoppers came for a look. Craig Rothlin, 34, and Kanako Nakarai, 31, were among them. Both work for tech companies, and have been hurt by the recent stock market rout.
“A good chunk of our down payment is caught up in that,” Rothlin said.
The couple had been waiting to see prices come down. But, so far, that hasn’t happened. The last home they bid on got multiple offers and sold for $180,000 over the asking price.
Seattle is an epicenter of the U.S. outbreak, and FOUR DOZEN GROUPS are looking at an open house? Many said they hoped that the virus would keep other would-be buyers away? There’s your takeaway!
Let’s focus on the facts.
In the area between La Jolla and Carlsbad, there are 121 houses for sale priced under $1,500,000, and 158 pending listings. When there are more pendings than actives, it means the demand is outstripping the supply! Even if some nervous nellies decided to wait it out, there will still be plenty who want to buy a home when rates are at all-time lows.
What about the high-end, Jim, aren’t the affluent more susceptible to stock market swings? Maybe, but they’re not going to give it away! This scare will be over in less than a year, and rich people have a long history of waiting on price, rather than dumping.
What if we have a recession? Then don’t make your payments – banks don’t mind!
It would take a flood of inventory to disrupt the market in a bad way. But the COVID-19 is causing a hunker-down-and-do-nothing environment. Homeowners aren’t going to panic and uproot their life just because of some stinking virus that will pass in 6-12 months.
Rates are really low, and the market is responding. We’ve considered it a balanced market when the active listings are running about twice the number of pendings. Here’s how we’re doing so far in 2020, and compared to last February:
NSDCC Detached-Home Active and Pending Listings:
Ratio in Feb 2019
We are at the 2.0 mark, but take out La Jolla and Rancho Santa Fe and we’re at 1.3!
In SE Carlsbad and Carmel Valley – which are about the same size – we have more pendings than actives!
With our tight inventory and ultra-low mortgage rates, it kinda feels like Tesla stock. One minute you’re in the $800s, and the next thing you know, the same house is in the $900s!
What can buyers do?
Don’t buy crap.
Simple enough, right?
But it’s hard to accomplish both, because the best locations have the oldest homes.
Let’s narrow it down further.
If you can afford a decent location, what else can a buyer do to ensure a smart purchase?
Buy a newer home, and/or buy a one-story home.
Newer: Homes built in the last 15 years typically have modern floor plans with a large open great room and lots of windows that allow for ample natural light. When you go to sell it someday, it will still be a desirable home without a load of upgrading or maintenance costs to you.
One-Story: Boomers aging in place guarantee that the scant supply of one-story homes will stay tight, and those that do leak onto the open market will be hotly contested.
Here’s a good example.
This sold for $850,000 two years ago, and after a complete remodel it goes on the market for $1,149,000…..and they get multiple offers. Those who thought they could still buy a nice house in Old La Costa in the $800,000s are really scratching their heads now! But it had the good location, and the sellers added the new look to clinch a nice boost in value.
If you want to stick with a newer house and/or a single-story house, what are your chances?
# Built Since 2005
# One-Story Built Since 2005
0 – $1M
$1M – $2M
$2M – $3M
Buying a newer home or a single-story really looks daunting now, but if you can pull it off, you got it made!
Insisting on a newer home and/or a one-story home will give you maximum assurance that you’ve made a smart buy that will appreciate better than the rest. We can add a few older homes that have been thoroughly remodeled, but they probably still have a floor plan cut up into smaller rooms with low ceilings.
More evidence of the local listing count plunging….and seller price expectations rising!
The top 20 toughest housing markets includes a diverse geographic mix of larger established metros and up-and-comers where housing is still relatively affordable. They are concentrated in three regions of the country — eight metros from the West, six from the Midwest and six from the Northeast. None of the markets are located in the South, which dominates the list of top 20 easiest markets to find a home.
California led the national list of toughest housing markets, with six of the top 20 toughest markets coming from the state. Ohio followed with three markets — Columbus, Cincinnati and Akron — making the top 20 toughest markets list.
The scarcity of homes is reflected in the market prices, and the trend in most of the toughest markets is toward even fewer homes for sale. The average median listing price for the top 20 toughest markets was $480,830 in January, 40 percent higher than the average median price of the top 100 largest markets. In addition, 17 of the top 20 toughest markets began 2020 with double-digit annual declines in available inventory, with a handful of markets seeing more than a 30 percent drop, including San Jose, San Francisco, Seattle, Salt Lake City and San Diego.
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