I hope you had a wonderful and happy Thanksgiving!
If someone you know is thinking about moving, I am happy to share my insights on how they can achieve their best outcome in this real estate market. Please make a text intro or put them in touch because the real estate market may continue to be red hot in the first half of 2021 before cooling off.
Here is how home prices and sales changed last month in 6 Southern California counties:
- Los Angeles: the median home price rose 15.3% from a year earlier to $715,000, while sales climbed 11.2%.
- Ventura: the median price rose 12.9% to $655,000, while sales climbed 12.4%.
- San Diego: the median price rose 13% to $650,000, while sales climbed 22.9%.
- Orange: the median price rose 10% to $795,000, while sales climbed 23.7%.
- Riverside: the median price rose 14% to $445,500, while sales climbed 17.8%.
- San Bernardino County: the median price rose 14% to $400,000, while sales climbed 17%.
Based on the data and what I am seeing at my listings, the first few months of 2021 could be even hotter in our local real estate market. As interest rates and home supply increase on positive news related to the economic and vaccine progress, the artificial constraint created by the fears of Coronavirus will also begin to lift and home demand is likely to start cooling.
If you did not get a chance to read about the artificial constraint on home supply that I wrote about last week, it is worth the read–check it out here! Does this mean we are in for a real estate market peak in the future? Nobody knows. We know what goes up must come down but it is impossible to time the market, which is why I spelled out the top arguments in favor of selling now and buying now in my last report (link above).
Despite all the challenges 2020 has posed for our clients, our market, our industry, and ourselves, there is much to be thankful for when it comes to the economic and market recovery thus far. The data remains upbeat across most, though not all, economic indicators. And yet, even as things have gotten better in general, the effects of the recession have been very uneven. Workers in the service sector, communities of color, and those on shakier economic ground coming into the crisis have disproportionately borne the brunt of the economic impacts. Thus, even as the overall outlook improves and many are taking advantage of the opportunity to seize upon historically low rates, increased flexibility, and a reinvigorated desire for homeownership, a lot of healing still needs to take place in California too.
California Still Faces Challenges from the Pandemic and from Lack of Supply
The 7-day average for new COVID cases in California hit a new all-time high of roughly 12,500 this week, which is 25% higher than the previous peak during the summer. The daily numbers are another 24% higher than that, which is likely to become a bigger economic drag in the coming weeks. In addition, new listings fell to their lowest level in 6 months, which will pose a different challenge of how to maintain the momentum in closed sales without the inventory to put buyers into. I’ve talked extensively about the Coronavirus putting an artificial constraint on supply and its impact on home prices.
California Unemployment Back Down in Single-Digits
The labor market recovery in California continued last month as the state added more than 145,00 jobs and saw its unemployment rate dip to 9.3% from a high of more than 16% in April. This is the first time unemployment has dipped into the single-digits since the recession began. In addition, the job growth marks an acceleration from the roughly 100,000-job pace of the preceding two months.
New Home Sales Are Booming Nationwide
Despite coming in relatively flat for October, new home sales are hovering near the 1-million-unit mark despite ongoing economic challenges. Last week, there was a noticeable uptick in builder sentiments nationwide and this week’s release shows that this is likely based upon the fact that they are selling their products at a robust pace.
Higher Loan Limits For Conforming Loans
Conforming loans are a type of loan that buyers can utilize when buying a home. Every November, the Federal Housing Finance Agency (FHFA) revises conforming loan limits for mortgages acquired by Fannie Mae and Freddie Mac and those new loan limits become effective on the 1st of the new year. The FHFA recently announced a new loan limit of $822,375 in high-cost areas such as Los Angeles, which is up $55,000+ from last year’s limit of $765,600.
Exciting Coronavirus News
Scientists recently announced that after an intensive research study they have found 30 genes that block the virus from infecting human cells–this study is currently under peer review. The study focused on two goals:
- (1) identify the genes that make human cells more resistant to SARS-CoV-2 virus; and
- (2) test existing drugs on the market that may help stop the spread of the disease.
We can be hopeful that this time next year we can have our loved ones over for Thanksgiving without masks.
Home Insurance Premium Renewals May Go Up By As Much As 25% in 2021
Earlier this week, I logged into my State Farm app and discovered a notice that my premium for home insurance in 2021 was going up 25%! When I called, they confirmed that premiums were going up in spite of never having a home insurance claim. Check with your carrier and start shopping around to make sure you are getting a competitive rate.
Millions Face Eviction, Foreclosure
According to the US Census Bureau, 17.8 million people live in households with late rent or mortgage payments, and 5.8 million adults report being somewhat or very likely to be evicted or foreclosed upon in the next couple of months.
New All-Time Lows for Mortgage Rates This Week
The contract rate for Freddie Mac’s 30-year fixed-rate mortgage index hit a new all-time low this week with an average of just 2.72%. This is undoubtedly fueling part of the unseasonably robust uptick in demand that remains present in the comparisons to 2019 in the data on showings, mortgage applications, and PEAD form filings.
California Home Sales Increase for First Time in Three Weeks
The number of closed sales of existing single-family homes increased 8.8% in California after declining during the previous two weeks. As a result, closed sales remain 23.9% ahead of last year’s pace. Sales increased in every major region of the state as well with Southern California and the Far North leading the pack with 15% jumps in last week.
California REALTORS® Report A Strong Week and Optimism for Prices Going Forward
C.A.R.’s weekly survey of California REALTORS® showed that agents had a strong week leading into the holiday weekend with an increase in the percentage of respondents that they are seeing a lot of activity. In addition, expectations for prices remain optimistic as the percentage of REALTORS® predicting higher prices this week increased for the third consecutive week.
MORTGAGE DEMAND SPIKES AFTER ELECTION
*November Heats Up*
Demand had fallen off for about a month around the election, even though mortgage rates hovered near a record low. Mortgage applications to purchase a home rose 4% for the week, according to the Mortgage Bankers Association.
November is not historically a strong season for homebuying, but homebuyer demand is surging again and intense multiple-offer situations have increased.
SELLERS’ MARKET THIS WINTER
*According to Realtor.com*
Winter is normally a good time for homebuyers, however, since the coronavirus kept some buyers on lockdown for much of spring, many are making up for lost time by home shopping hard right now.
As a result, this winter is shaping up to be a seller’s market, with low real estate inventory, high prices, and bidding wars that could give buyers a major run for their money. But that doesn’t mean buyers should give up. There are some things they can do to get into the right home as soon as possible, but that also depends on the skill of their agent in navigating them through this crazy time.
*slight uptick each week in recent weeks*
According to Black Night, Inc., a data and analytics firm, active forbearance plans rose by some 30,000 last week and were up another 27,000 from last Tuesday. Let’s wait and see how the data comes in at month-end and year-end since mild increases like this have been common in the middle of the month. For example, since the recovery started, the strongest declines have typically been seen early in the month, as expiring forbearance plans are removed. The performance of the last two weeks has continued this trend.
*Rose To $778K*
- Worker filings for jobless benefits are down sharply from a peak of nearly seven million in late March.
- Claims haven’t risen for two consecutive weeks since July.
- Still, they remain higher than in any previous recession—the pre-pandemic peak was 695,000 in 1982—for records tracing back to 1967.
Hospitality & Airline Industries Decimated
*Great Impact On These Starting To Be Seen*
In September, Disney revealed that it planned to layoff 28,000 employees in the first half of 2021. As of early October, 37,000 employees who were not expected to be laid off were placed on furlough. Disney recently announced that 4,000 additional employees (32,000 total) will be laid off in the first half of 2021.
*at historic highs again this week*
In a week shortened by the holiday, stocks continued to climb. More news on the vaccine front indicates that approval to begin widespread vaccinations is just weeks away. The Dow Jones Industrial Average is up almost 13% for the month. Should it not see a decline on Monday it will mark the Dow’s best month in over 30 years. On Tuesday it climbed to over 30,000 for the first time.
By The Numbers:
- The Dow closed the week at 29,910.37, up 2.2% from 29,293.48 last week. It’s up 4.8% year-to-date.
- The S&P 500 closed the week at 3,638.35, up 0.8% from 3,557.54 last week. It is up 10.1% year-to-date.
- The NASDAQ closed the week at 12,205.85, up 3.0% from 11,854.97 last week. It’s up 36% year-to-date.
TREASURY BOND YIELDS
- The 10-year treasury bond closed the week yielding 0.84% almost unchanged from 0.83% last week.
- The 30-year treasury bond yield ended the week at 1.57%, up slightly from 1.53% last week.
- We watch bond yields because mortgage rates often follow treasury bond yields.
*some unchanged and still very lose*
The November 25, 2020, Freddie Mac Primary Mortgage Survey reported mortgage rates for the most popular loan products as follows:
- The 30-year fixed mortgage rate average was 2.72%, unchanged from 2.72% last week.
- The 15-year fixed was 2.28%, unchanged from 2.28% last week.
- The 5-year ARM was 3.18%, up from 2.85% last week.
US EXISTING-HOME SALES
*continues spike in October*
The National Association of Realtors reported that:
- Existing home sales in October rose 4.3% month-over-month from September and rose 26.6% year-over-year from the number of homes sold in October 2019.
- The median price paid for a home increased 15.5% from one year ago. That marked the 104th straight month of year-over-year increases in the median price.
- The inventory level in the United States was 1.42 million homes, a 2.5-month supply. That’s a record low. There was a 2.7-month supply last month and a 3.9-month supply in October 2019.
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