The graph above shows the raw data – how the pendings started to increase as we got into April. It seemed like the action began to slow down just recently, and, sure enough, the rolling averages have been in decline over the last week or two in San Diego – and elsewhere.
If you just need some covid relief, then the graph below will make you feel better. For the last month, the pending sales in San Diego have been comfortably ahead of last year’s counts.
The New Listings graph (above) shows how the raw number of homes listed for sale in the coronavirus era compares to the same time frame in 2019.
It shows that 40-50 days after the initial shock, sellers started feeling more comfortable putting their home on the market, and for the last twenty days, San Diego has only been 5% to 21% behind last year.
The graph below helps to demonstrate the supply vs. demand relationship year-over-year, and it’s helpful to call these Unsold Listings because they are the net outcome (Supply – Demand = Unsold Listings).
If we were running at the same pace as in 2019, and the demand percentage had dropped the same as supply, then our Unsold Listings would simply be the same 5% to 21% lower than last year. But our number of Unsold Listings are now 37% below last year – the best in the southwest!
Lower inventory, record-low rates, and the insanity are causing demand to surge!
Thanks Mike!
When the coronavirus shut down the economy coast to coast, it was natural to assume that the real estate market would take a hit. Being in quarantine would certainly cause sales to plummet, and with 20% to 30% unemployment, prices would follow, right?
All that was left was to guess how much prices would go down.
But a funny thing happened on the way to the apocalypse.
The Fed poured $7 trillion+ into the economy, and mortgage rates hit all-time lows, which provided just enough levitation support that those aggravated by the quarantine shrugged off the virus and started buying homes again.
But sellers didn’t get the memo, and our supply has suffered – but not prices:
NSDCC Listings Between Jan 1 and June 15
| Year | ||
| 2016 | ||
| 2017 | ||
| 2018 | ||
| 2019 | ||
| 2020 |
With fewer comps and less competition (listings down 19% YoY), the list prices have been rising!
The lower rates are helping figuratively, more than literally – the ego loves the thought of getting the lowest rate in history. Compared to last May, the actual benefit is $60 per month per $100,000 of loan, which adds up but jumbo rates are higher and we’ve already been used to having really low rates so today’s record lows aren’t the only thing fueling the comeback.
The spring season was already shaping up to be very positive, so the compression of the entire session into the next 2-3 months is what’s driving the demand. As long as people are feeling relatively safe, we should be seeing elevated statistics just because of the compression – which may give sellers a false sense of security that any price will work.
The lack of competition is a seller’s best friend:
The motivated buyers – which now include the additional demand from folks who now have to work out of the house, instead of an office – are seeing so few of the new listings that meet their needs that if they see a hot one, they pay whatever it takes – and bidding wars are back. Here’s a sample of home sales in Carmel Valley and Southeast Carlsbad between $1,200,000 and $1,500,000 that have closed escrow in the last 30 days (during the corona):
Ten of the 24 sales closed OVER list price, and the average SP:LP ratio is 100%!
While this is the modest end of the range for both areas, homes in the $1,200,000 to $1,500,000 range still cost a ton of money – yet virtually no discount on price, even during the coronavirus!
We love the ‘burbs! One explanation as to why our pricing has been stout:
If millennials once piled into the cities, fueling downtown renewal and growth, apparently they are now piling out.
The stay-at-home orders brought on by coronavirus have more potential homebuyers looking for properties in the suburbs. Millennials are now the largest cohort of buyers.
As the real estate market began to recover in May, home searches in suburban zip codes jumped 13%, according to realtor.com, one of the largest real estate listing websites. That doubled the pace of growth in urban areas.
While homes are spending more time on the market overall, due to complications surrounding closings, both suburban and rural markets are not experiencing that lag time as much, due to very strong demand.
“This migration to the suburbs is not a new trend, but it has become more pronounced this spring,” said Javier Vivas, realtor.com director of economic research. “After several months of shelter-in-place orders, the desire to have more space and the potential for more people to work remotely are likely two of the factors contributing to the popularity of the burbs.”
More than half of the nation’s 100 largest metropolitan areas are seeing increased interest in the suburbs. Real estate agents in the New York City area have reported strong demand in the surrounding suburbs, as contracts on Manhattan apartments plunged 80% annually in May, according to Jonathan Miller of real estate appraisal firm Miller Samuel.
This new flight to the suburbs is clearly benefiting the nation’s homebuilders, who have seen a much quicker recovery than they ever expected.
“There’s no question that there are people who are fleeing the cities. There’s no question that the second home has been a place of refuge. There’s no question people are rethinking whether they want to be in high rise rentals with common spaces as amenities vs. having a home of their own with a backyard,” said Stuart Miller, chairman and former CEO of Miami-based Lennar.
https://www.cnbc.com/2020/06/18/coronavirus-update-people-flee-cities-to-live-in-suburbs.html
In spite of having about 300 fewer homes for sale to consider, our total number of pendings has exceeded last year’s count at this time! A sensational market comeback!
There were 59 new pendings between $1.0M and $3.0M in the last week:
NSDCC Actives & Pendings By List Price
| Price Range | ||
| $0-$1M | ||
| $1.0-$1.5M | ||
| $1.5M-$2.0M | ||
| $2.0M-$3.0M | ||
| $3M+ |
Last year the market had peaked in May, and mostly plateaued through the summer.
But this year, we should see some of the best summer numbers ever.
Showings are higher than last year, and the number of new escrows is growing!
Southern California homebuying rose for the seventh straight week as house hunters put 10.3% more homes into escrow. Still, it’s a buying pace 3.1% below a year ago.
Zillow’s weekly report on activity from brokers’ listing services in Los Angeles, Orange, Riverside and San Bernardino counties shows the housing market rebounding from economic turmoil created by “stay at home” orders designed to slow a pandemic’s spread. With 3,555 existing homes put into escrow in the week ended June 6 — buying is up 331 in a week but down 115 in a year.
Southern California owners listed 4,849 homes for sale in the week — up 17.3% vs. the previous week; but down 13.3% in a year. That put total inventory at 23,597 — down 2% vs. the previous week; and down 31.3% in a year.
Fewer restrictions on business, including home sales, plus low mortgage rates are putting owners and house hunters in a selling mood. But even after a significant run-up of late, much of the activity trails year-ago levels. (Note: This week’s upticks may partially reflect last week’s Memorial Day holiday!)
Link to OCR article
Just like the price of gasoline, mortgage rates are very slow to come down, but they tend go up like a rocket – and with the surprising employment news today, we’ll probably get back into the mid-3s by Monday. We’ll see if the lowest rates in history were the sole reason why showings rebounded so quickly. From cnbc:
What’s good news for the U.S. economy is suddenly bad news for mortgage rates. A far-better-than-expected May employment report only added to a growing sell-off in the bond market, pushing yields to the highest level since March. Mortgage rates loosely follow the yield on the 10-year Treasury.
Rates have been rising this week, after sitting around a record low for the last two weeks. Friday, the average mortgage shopper may see rates on the 30-year fixed as much as a quarter point higher, according to Matthew Graham, COO of Mortgage News Daily, which runs daily averages from lenders.
For those with top-tier credit and financials, they may only see an eighth of a point increase, but for those with lower scores and down payments, the jump could be as much as 0.375%.
“It’s going to be ugly,” said Graham. “Today is the first time since the Covid-19 market reaction settled down in March that interest rates truly have a reason to panic. Until further notice, this looks like liftoff.”
This is not, of course, the last word in a mortgage market that has been on a rate roller-coaster ride fueled by a massive spike in mortgage delinquencies, an initially confusing and risk-ridden government bailout, and an overstressed loan servicing system. The mortgage bailout has been clarified, with parts rewritten to help servicers, the number of borrowers in forbearance plans is shrinking and mortgage companies are on a massive hiring spree.
I called it a Stunning Recovery on Monday, and they used the same words today. Coincidence? 🙂 Hat tip Mitch!
If mortgage demand is an indicator, buyers are coming back to the housing market far faster than anticipated, despite coronavirus shutdowns and job losses.
Mortgage applications to purchase a home rose 6% last week from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Purchase volume was just 1.5% lower than a year ago, a rather stunning recovery from just six weeks ago, when purchase volume was down 35% annually.
“Applications for home purchases continue to recover from April’s sizable drop and have now increased for five consecutive weeks,” said Joel Kan, an MBA economist. “Government purchase applications, which include FHA, VA, and USDA loans, are now 5 percent higher than a year ago, which is an encouraging turnaround after the weakness seen over the past two months.”
As states reopen, so are open houses, and buyers have been coming out in force, if masked. Record low mortgage rates, combined with strong pent-up demand from before the pandemic and a new desire to leave urban downtowns due to the pandemic, are driving buyers back to the single-family home market. It remains to be seen if this is simply the pent-up demand or a long-term trend.
Link to CNBC Article
Everything seems like “If” these days, but if we had a market comeback, the dates of a modified and compressed selling season would be fairly predictable, looking at it logically.
The actual results will be a matter of compression and intensity.
If there isn’t much of a market rebound, then we might only have a couple of hot weeks in July, and a lot of standing around, relatively. If things get cooking, then we could have a solid 4-6 weeks before school starts (in red above) when the most sales will be made.
The dates in green is when buyers will be looking hard – and might be when the best deals are made.
Two to four weeks in October will be a lost cause, due to the election. In December, buyers and sellers will both pack it in early for the holidays, and prepare to GET ‘ER DONE IN ’21!
Next year’s selling season is 11-12 months away – we gotta be ok by then, right?
Then all we have to do is get through 2020!
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?
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?
| Price Range | ||||
| 0 – $1M | ||||
| $1M – $2M | ||||
| $2M – $3M | ||||
| $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.
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