The Tidwell Report

Happy Father’s Day to all of our dads! Some of us may not get to be with our fathers this Father’s Day so if you are one of the lucky ones who do then please cherish it!

THE LATEST
I continue to hear stories of couples running into opposite rooms for Zoom calls and scheduling their days to avoid awkward interruptions during those calls. One client with 3 kids reported locking herself in a closet to avoid interruption during an important conference call in which her company was about to land their biggest client ever.

Given the new and constantly changing “normal,” it unsurprising that buyers want more living space, more outdoor space, or to live outside the city (or some combination), making the Suburbs an attractive destination, which is supported by a lot of the reports I’ve seen. At the same time, a lot of sellers see this as their opportunity to make a move to another state.

Supply
Housing inventory is starting to improve but still not keeping pace with demand as economies restart. This is fueling bidding wars even as more sellers are listing their homes for sale than in recent weeks. If there is a spike in Coronavirus going into the Fall and governments seek to shutdown economies yet again, it is impossible to predict the impact that this will have on the real estate market.

The increase in listings, albeit small, is the result of homeowners selling off second homes, homes that they moved out of but had been renting, and homes that they are leaving behind in favor of a home in another state. There is a growing number of sellers are taking advantage of low rates and using this opportunity to upsize or downsize, and or to get closer to family.

Demand
Demand for homes that meet their criteria exceeds supply in virtually all cases. In fact, demand has recovered and continues to soar more than 25% above pre-COVID levels. Desirable homes always went fast, but we now know they go faster during a pandemic, which created an artificial constraint on the already critically low housing supply. This time has been a boon for homeowners who want out of Los Angeles or to cash out as prices continue upward. It is unclear how long this can last, but it could keep going.

The action on the demand side is attributable to low mortgage rates and the wealth effect, which essentially means that people feel more financially confident and secure about their wealth when their homes or asset portfolios increase in value–nobody expected the stock markets to roar back close to their highs as they have. Data on consumer spending and housing released this week revealed much stronger than expected results while it was a quiet week for mortgage markets even as mortgage rates ended a little lower.

Low rates also caused mortgage demand to spike to an 11 year high overwhelming lenders. In some cases, I’ve heard lenders turn away business, or not being able to meet contingencies or close on time for homes in escrow, adding more uncertainty to transactions.

This is why it is critical to have an experienced advisor involved on your side when buying or selling real estate. If you know someone thinking about buying or selling, I am happy to have a conversation so they can make an informed decision in this real estate market.

SOMETHING TO WATCH
In its response to the COVID-19 pandemic, the agency that oversees California’s courts declared that courts would not consider tenant eviction cases for the duration of Gov. Gavin Newsom’s state-of-emergency declaration plus 90 days. That means that Landlords with tenants who are not paying rent have almost no immediate options and will suffer potentially disastrous financial pain if either Newsom’s state of emergency continues for many months or this agency maintains its position.

Landlords with diversified portfolios may be able to survive, but the smaller mom and pop landlords who are less diversified may not fair as well given that their cash flow may not cover expenses. However, this may offer some hope:

Two landlords filed a lawsuit earlier this week challenging California courts’ refusal to hear eviction proceedings. If landlords secure the right to evict before those tenants can resecure employment, then that could represent a disruption to local economies.

GALLUP ANNUAL INVESTMENT POLL
Real estate continues to rank at the top of the list of the best long-term investments for Americans, according to an annual poll from Gallup. About 35% of Americans said it was their favorite investment, which has been the case since 2013.

Meanwhile, Americans are less likely to view stocks or mutual funds as the best long-term investment, particularly after the COVID-19 pandemic. Twenty-one percent of Americans picked stocks as the best investment, down 6 percentage points from a year ago and at the lowest reading since Gallup started collecting such data in 2012.

Only about one in six Americans view savings accounts or CDs (17%) and gold (16%) as their favorite long-term investment.

FORBEARANCE
*active forbearances down for the 3rd straight week*
According to BlackKnight, the number of mortgages in active forbearance fell for the third week in a row. Overall, the number of active forbearance plans is down 57,000 from last week and down 158,000 from the peak during the week of May 22. As of June 16, 4.6 million homeowners remain in forbearance plans, representing 8.7% of all active mortgages, down from 8.8% last week. Together, they account for just over $1 trillion in unpaid principal ($1,012 billion).

CALIFORNIA EXISTING HOME SALES
The California Association of Realtors announced that existing home sales totaled 238,740 on a seasonally adjusted annualized basis. As expected that was down 41.4% from the number of homes sold last May. May sales consist mostly of homes that went under contract and in escrow in March and April when it was not permitted to even show a home in some cities. Fortunately, since May pending sales, homes that went under contract, have increased.

Median Price In CA
The median price paid for a home in California decreased 3.7% year over year from last May. That marked the first year over year decrease in almost a decade. Experts were not surprised by this, as many of these sales represented people that either bought homes virtually, or viewed homes in person against city ordinances. Fortunately, those ordinances changed in the third week of April, and in-person showings became permissible with safety restrictions statewide. Once that happened, pending sales increased sharply.

On a Regional Basis:
As compared to last May, the median price increased in Los Angeles County (1.4%) and Ventura County (3.1%), but was down in Orange County (-1.2%). We are expecting the median price increases to be higher next month judging by the pending sales.

STOCK MARKETS
*higher on retail sales rebound*
Stocks soared Monday after The Commerce Department reported that retail sales rose 18% in May. It was the largest monthly increase ever, and investors read the report as a sign that the economy was rebounding quicker than expected.
The Dow Jones Industrial Average closed the week at 25,871.46, up 1% from 25,605.54 last week. It’s down 9.3% year to date.
The S&P 500 closed the week at 3,097.74, up 1.9% from 3,041.32 last week. It’s down 4.1% year to date.
The NASDAQ closed the week at 9,946.12, up 3.7% from 9,588.81 last week. It’s up 10.8% year to date.

US TREASURY BOND YIELDS
*Yields almost unchanged*
The 10-year treasury bond closed the week yielding 0.70%, unchanged from 0.71% last week.
The 30-year treasury bond yield ended the week at 1.47%, almost unchanged from 1.45% last week.

MORTGAGE RATES
*dropped again*
The Freddie Mac Primary Mortgage Survey released on June 18, 2020, reported mortgage rates for the most popular loan products as follows:
The 30-year fixed mortgage rate average was 3.13%, down from 3.21% last week.
The 15-year fixed was 2.58%, down from 2.62% last week.
The 5-year ARM was 3.09% almost unchanged from 3.10% last week. Rates dropped late in the week.

Have a great Father’s Day!

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