The Tidwell Report

The activity in the Los Angeles real estate market has been remarkable and a rare highlight of 2020. While sales may be down as a total compared to last year, do not let that fool you about what’s been going on. I have not taken a day off in 8+ weeks which is why I have not sent out an updated report during that time.  I’ll be brief:

Prospective buyers and sellers who look to upgrade have gained extra time in their day as well as greater flexibility in their work schedules to shop for homes because they no longer commute to work or need to appear in an office. As people orient their lifestyle to the realities of the pandemic, low interest rates and a strong desire for more space remain the biggest drivers of demand.

August and September saw intense bidding wars–some created by below market list prices while others resulted from a significant lack of home inventory, which is an excellent housing market indicator. The median price is way up over what it was a year ago and total home sales are climbing quickly again after the initial lockdown/quarantines in March/April/May put the brakes on home sales. Since then people have been fleeing denser living in high rises, condos, and townhouses in favor of single-family homes.

Nobody knows when demand will truly slow down to a calmer pace though I expect demand to simmer as Fall comes to an end Winter begins. I also do not expect there to be any dramatic increases in supply coming any time soon. If people pull money from the stock market, or the stock market is rattled by the election hoopla, then this could affect demand because people may be less willing to proceed with a home purchase if they perceive they are less wealthy after they see a decline in their retirement accounts. Then again, we’ve seen a several steep stock market sells offs followed by stock market rallies so let’s go with the assumption that this will continue.

Still, the home inventory shortage plus low interest rates will continue putting upward pressure on home prices through 2021 although the next few months could see uncertainty given the election and rhetoric surrounding it. Other good signs from September include the decrease in the number of forbearance cases, the decrease in seriously delinquent mortgages, and a significant increase in the number of single-family housing starts.

If you know anyone looking to buy or sell, please put them in touch as I can give them some great advice about how to succeed in this market.

More Details On This Economic Update:

EXISTING SINGLE-FAMILY HOME SALES
*home sales and median prices are way up while inventory is very tight*

The California Association of Realtors reported that:

• Existing, single-family home sales totaled 489,590 on an annualized basis in September.  That represented both a month over month increase of 5.2.% from August and a staggering year over year increase of 21.2% from the number of homes sold in September 2019.
• Traditionally, home sale activity starts to cool in September, but this September marked the highest monthly number of homes sold in over a decade.
• The median price paid for a home in California was $712,430, up 17.6% from the median price last September. Inventory levels were lower than one year ago. There was just a two month supply of homes for sale in September.

On A Regional Level:
The median price paid for a home was sharply higher than one year ago. The year-over-year median price increases were as follows:

• LA County – $747,380 (+12.7% from 1 year ago).
• Ventura County – $787,500 (+19.5% from 1 year ago)
• Orange County – $915,000 (+10.2% from 1 year ago)

ACTIVE FORBEARANCE PLANS
*down significantly from the peak in late May*
As of Oct. 20, nearly 3 million borrowers remain in active COVID-19 forbearance plans, which represents 5.6% of first lien mortgages. This is a noticeable reduction from the market’s peak of 4.76 million in late May. More than 80% of remaining forbearance plans have had their terms extended with their servicer.

SERIOUSLY DELINQUENT MORTGAGES
*first signs of improvement beginning to shine*

• The number of seriously delinquent mortgages (90+ days) fell by 43,000 in September, marking the first such improvement in serious delinquencies since the start of the pandemic
• More than 2.3 million homeowners – five times the number entering 2020 – remain 90 or more days past due, but not in foreclosure
• The national delinquency rate fell in September to 6.66%, down from 6.88% the month prior
• Early-stage delinquencies continue to show strong improvement, with rolls from current to 30-days delinquent, as well as the number of borrowers less than 90 days delinquent, having returned to pre-pandemic levels
• Both foreclosure starts and foreclosure sales continue to remain muted given the widespread foreclosure moratoriums still in place
• After a slight pull back in August, prepayment activity jumped above 3% in September for the first time in more than 16 years, fueled by record low rates and an elongated home buying season

STOCK MARKETS
*Stock markets moderately lower this week*
Stocks markets closed slightly lower this week following three weeks of health gains. Third-quarter corporate profits began to be reported. They were stronger than expected. Investors watched for another round of stimulus to be agreed upon, but despite several deadlines, nothing was accomplished. The good news is that investors are convinced one will be passed, but it may only come after the election when congresspeople would be more willing to compromise without the fear of losing votes.

By The Numbers:

• The Dow Jones Industrial Average closed the week at 28,335.67, down 0.9% from 28,608.31 last week. It’s down 0.7% year-to-date.
• The S&P 500 closed the week at 3,465.39, down 0.5% from 3,483.81 last week. It’s up 7.3% year-to-date.
• The NASDAQ closed the week at 11,548.58, down 1.1% from 11,671.56 last week. It’s up 28.7% year-to-date.

U.S. TREASURY BOND YIELDS
*yields ticked up*

• The 10-year treasury bond closed the week yielding 0.85%, up from 0.76% last week.
• The 30-year treasury bond yield ended the week at 1.64% up from 1.52% last week.
• We watch bond yields because mortgage rates often follow treasury bond yields.

MORTGAGE RATES
*rates are almost unchanged and still very low*
The October 22, 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 2.80%, unchanged from 2.81% last week.
• The 15-year fixed was 2.33%, almost unchanged from 2.35% last week.
• The 5-year ARM was 2.87%, almost unchanged from 2.90% last week.

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