I’ve had a lot of questions about the state of the real estate market. If you have any questions, let me know. I’m also doing Zoom state of the real estate market chats. Let me know if you want me to send you a link.

Below are my observations, the economic report for the week ending May 2, 2020, and the report for April’s month end results.

While our offices are closed, I am still actively helping people buy and sell their homes since real estate agents are deemed “essential” under the governmental orders. However, open houses are prohibited while private showings of homes are allowed but only under strict requirements. This limits the number of people in a home at the same time and reduces the risk of exposure.

All parties must sign a Coronavirus Entry Form and they must wear gloves, masks, and booties. I use a lot of disinfecting wipes on the surfaces between showing to sanitize the home being shown–touching doors and drawers by visitors other than the agent is prohibited.  Sellers also cannot be home.

I only allow buyers to schedule a private showing once they confirm that they took the online 3D tour and or attend a virtual showing over Zoom or Facetime.

I’ve noticed that these operating parameters have eliminated a lot of people who are not serious about buying a house.

My Observations – Demand for Homes
Some prospective buyers are no longer in a position to buy–they lost their jobs or they were furloughed–while other prospective buyers took to the sidelines to wait things out, leaving a segment not willing to put their searches on hold. If you recall, demand exceeded supply by a significant margin before the Coronavirus hit.

The reduction in demand resulting from the Coronavirus was partially offset by buyers attracted back into the market by low interest rates and the prospect of less competition among buyers for homes during the pandemic. I’ve had some clients on the buy-side who are receiving quotes on 30 year fixed purchases for as low as 2.875% with a large relationship.

I am also seeing strong interest for homes from buyers who work in health care, law enforcement, government services, and professional services industries. An often-cited buyer preference is finding a home that is great for quarantining.  Homes with big backyards and pools topped the list.

My Observations – Supply of Homes
The Coronavirus has affected more than just demand. It has affected the types of homeowners who are listing their homes for sale, but also the total supply of homes for sale. When the quarantine was implemented, a significant number of homeowners pulled their homes off the market completely or put their listings on hold. Some of those listings came back on the market but there are definitely fewer homes for sale in most areas after Coronavirus.

Partially offsetting this decline in listing inventory are newly listed homes for sale by:

• homeowners who must move,
• those who own second homes, and
• those who previously offered their homes for long term or short term rentals, like AirBNB.

It is worth noting that the AirBNB market is being hit hard because many AirBNB homeowners are overleveraged and their success hinged on the income stream from an active short term rental market to pay their mortgages and to generate a profit.  Without that income stream, they face potential significant financial losses given the uncertain future of the economy, so we see some of those homes being offered for sale.

Home Sales
So in spite of the Coronavirus, we are still closing escrows. In fact, I listed two during this recent period, both received multiple offers, and they entered escrow within days of going on the market. Their sales prices were 7% above asking. So real estate prices are holding for now.

Home sales reports are released on the third week of the month for the previous month. These are the March results:

MARCH 2020 UNITED STATES HOMES SALES REPORT
The National Association of Realtors reported that:

The total existing-home sales in March fell just 0.8% from the number of sales in March 2019. Considering that 80% of the country was under a stay-at-home order in March, this was quite a positive result. These homes went under contract before the crisis, as most closings take 30-60 days, but the buyers did close during the crisis.

Prices were also up significantly in March. The median price was 8.0% higher than last March. That marked the 97th straight month of year over year increases in the median price.
Inventory levels were tight. There was a 3.4 month supply of housing on the market.

FEBRUARY 2020 CALIFORNIA EXISTING SINGLE-FAMILY HOMES SALES REPORT
*Q1 was off to a strong start before Coronavirus hit*
The California Association of Realtors reported that:

• The existing single-family home sales totaled 421,670 in February on a seasonally annualized rate that represented a 6.6% month over month increase from January and a year over year increase of 5.9% from February 2019.
• The statewide median price was $579,770, up 8.5%from last February.
• The unsold inventory index was a 3.6 month supply of housing, down from a 4.6 month supply in February 2019.

MARCH 2020 CALIFORNIA HOME SALES REPORT
*Impact of the pandemic has begun to be felt as the number of sales dropped while prices continued to rise*
The California Association of Realtors announced that:

• The existing single-family home sales totaled 373,070 on a seasonally adjusted annualized rate in March, down 6.1% from the number of sales in March 2019.
• The statewide median price paid for a home in March was $612,440, up 5.6% from February and up 8.3% from one year ago. The median price is the point at which 1/2 the homes sell for more 1/2 the homes sell for less.  Escrow periods are commonly between 30 and 60 days, so these sales represent homes placed in escrow before the crises. Homes sold during the crises are just beginning to close.
• There was a record low 2.7 month supply of homes for sale in March compared to a 3.6 month supply in February and a 3.6 month supply of homes for sale last March. That is due to so many people removing their homes from the market.

On A Regional Basis:

• Los Angeles County saw the median price increase 8.1% from last March.
• Orange Country saw the median price increase 9% from one year ago.
• Ventura County saw the median price increase by 10.2% over last March.

UNEMPLOYMENT
The unemployment rate and official jobs report will be released next Friday by the Labor Department. Those figures will be included in my April month-end economic update which I will send on May 10, 2020.

Economic Update for the Week Ending May 2nd
STOCK MARKET
*Stock markets posted their largest monthly gains in 30 years in April*
Stocks recovered in April after a devastating March. Despite a disappointing 4.8% decline in first-quarter GDP, the worst quality decline since 2008, stocks ended the month much higher. Approximately $3 Trillion in government stimulus to businesses and individuals, unprecedented action by the Federal Reserve adding Trillions in liquidity, and states beginning to allow businesses to reopen fueled the rebound. The Dow had dropped from 29,000 in February to 18,000 by the third week of March before stead recovering.

By The Numbers:

• The Dow Jones Industrial Average closed the week at 23,723.69, down 0.2%, from 23,775.27 last week. It’s down 16.9%  year to date.
• The S&P 500 closed the week at 2,830.71, down 0.2% from 2,836.74 last week. It’s down 12.4% year to date.
• The NASDAQ closed the week at 8,604.95, down 0.3% from 8,634.52 last week. It’s down 4.1% year to date.

US TREASURY BOND YIELDS

• The 10-year treasury bond closed the week yielding 0.64%, up slightly from 0.60% last week.
• The 30-year treasury bond yield ended the week at 1.27%, up from 1.17% last week.

MORTGAGE RATES
*rates are at record lows*
The Freddie Mac Primary Mortgage Survey released on April 30, 2020, reported mortgage rates for the most popular loan products as follows:

• The 30-year fixed mortgage rate average was 3.23% down from 3.33% last week.
• The 15-year fixed was 2.77%, down from 2.86% last week.
• The 5-year ARM was 3.14%, down from 3.28% last week.

UNEMPLOYMENT
*claims jump for the fifth straight week*

• Another 3.85 million American workers filed first-time unemployment claims last week. That brings a total of over 30 million workers laid off in the last six weeks.
• The unemployment rate has gone from a 50 year low of 3.6% in February to over 20%, the highest rate since the Great Depression, in just 6 weeks.
• Fortunately, these job losses are mostly temporary as employers will gradually rehire their workers once they are permitted to re-open.

April Month End Economic Report
STOCK MARKET

• The Dow Jones Industrial Average ended the month of April at 24,345.72, up 11% from 21,917.16 on March 30, 2020.
• The S&P 500 closed the month at 2,912.44, up 12.6% from 2,585.59 at the end of March.
• The NASDAQ closed the month at 8,889.55, up 15.5% from 7,700.10 on March 30, 2020.

US TREASURY BOND YIELDS
*yields dropped to record lows in April*

• The 10-year U.S. treasury bond yield closed the month of April at 0.64%, down from 0.70% on March 30.
• The 30-year Treasury yield ended the month at 1.28%, down from 1.35%  at the end of March.

MORTGAGE RATES
*rates record lows in April*
The April 30, 2020 Freddie Mac Primary Mortgage Survey reported that:

• The 30-year fixed mortgage rate average was 3.23%, down from 3.33% on April 2, 2020.
• The 15-year fixed was 2.77%, down from 2.82% April 2.
• The 5-year ARM was 3.14%, down from 3.49% on April 2, 2020.

Have a great Sunday night!

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