The Tidwell Report

The real carnage from the Coronavirus is starting to make an appearance in April’s home sales report.  Before I dive into that, some guidance on forbearance was issued this week after it seemed like entering a forbearance agreement was agreeing to borrower purgatory.

Make sure to read the CA Home Sales Report For April if you want an eye into what happened and what we are seeing. Based on everything I am seeing, this Summer will be the new homebuying season. A lot of people realized that they can do their jobs anywhere and they want out whereas a lot of buyers who put their searches on hold are returning to the market since their job or business was spared.

I am around this weekend if you or someone you know has any questions about the real estate market, or they may be looking to buy or sell a home sometime in the future.

F-WORD UPDATE
*8.8% of all active Mortgages, or 4.7M homeowners, in Forbearance as of May 12 — representing more than $1 Trillion in prinicipal*
Last week, we covered the F-Word, Forbearance, and what lenders were not telling their borrowers. This week, new guidance was issued by Freddie Mac and Fannie Mae that will allow a homeowner in a forbearance agreement to buy a new home or refinance if they are current on their mortgage. In addition, borrowers will be permitted to refinance or to get a new purchase loan three months after forbearance ends and borrowers have made 3 consecutive payments under their repayment plan, deferral plan, or loan modification. It remains advantageous to avoid forbearance unless absolutely necessary because of the negative inference creditors can make when it appears on a borrower’s credit report.

• Of the 4.25 million homeowners who were in forbearance at the end of April, nearly half of them actually made their monthly mortgage payment anyway.
• The pace of new forbearance plans is down dramatically. There was an average net increase of just under 26,000 per day over the week – a reduction of more than 85% from the rate in early April.
• The loans currently in forbearance represent 8.8% of all active mortgages and more than $1 trillion in unpaid principal

CALIFORNIA HOME SALES REPORT FOR APRIL
The California Association of Realtors reported that:

• Existing home sales totaled 277,440 on a seasonally adjusted annualized bases. That represented a 30.1% drop from the number of homes sold last April.
• The statewide median price was $606,410, up just 0.6% from last April’s median price. Fortunately, Los Angeles, Ventura, and Orange County posted much better results with prices up 3.9% in LA County, up 4.4% in Orange County, and up 3.8% in Ventura County. The number of sales was also down 30% in LA County and Ventura County, and down 37% in Orange County. This was expected. These numbers represent closings.
• Escrow periods are generally 30 to 60 days, so these homes were placed in escrow in February and March. The number of sales in May will be substantially lower, as it was not legal to show homes from March 20 to the middle of April in the City of Los Angeles, and Ventura County. People were also afraid to look in other areas where it was permissible. For some reason now buyers have returned and it’s legal to show homes so long as protective guidelines are followed, which everyone seems willing to comply with. We certainly feel 100% more comfortable looking at a home than we do going to a market because of all the protective measures we are taking!
• Fortunately, the association also tracks pending sales, which are new contracts signed. Those have increased every week for the last 5 weeks, so we will begin to see a rebound in closed sales in June. It will probably be many months before we get back to the number of sales we saw last year.
• Prices are another story. From what we are seeing we will be surprised if the median price is not up at least 6% year over year when June’s sales numbers are reported in July.  The amazing part of the report is that out of the reduced number of homes that sold 100% were reported at full price or more. We really find that hard to believe, but we’ve never seen CAR make a mistake with their numbers. Keep in mind that many people took their homes off the market and there were very few homes to look at in March.

US HOME SALES REPORT FOR APRIL
The National Association of Realtors reported April home sales figures on Friday. The National figures were much stronger than California’s numbers. The number of sales dropped 17.2% from one year ago, about 1/2 of the drop California saw. The median price paid for a home in the U.S. jumped 7.4% from the median price last April.

STOCK MARKETS
*Stock market indexes gained over 3% this week*
Stocks had a nice rally this week as investors were encouraged because the majority of the country began allowing businesses to re-open. There is also a new round of stimulus that should be voted on and approved in the first week of June. That certainly helped fuel this week’s rally.

By The Numbers:

• The Dow Jones Industrial Average closed the week at 24,465.15, up  3.3% from 23,685.52 last week. It’s down 14.3% year to date.
• The S&P 500 closed the week at 2,966.45, up 3.2% from 2,863.70 last week. It’s down 8.5% year to date.
• The NASDAQ closed the week at 9,324.59, up 3.4% from 9.014,56 last week. It’s up 3.9% year to date.

US TREASURY BOND YIELDS

• The 10-year treasury bond closed the week yielding 0.66% almost unchanged from 0.64% last week.
• The 30-year treasury bond yield ended the week at 1.37%, up slightly from 1.32% last week.

UNEMPLOYMENT
*Unemployment claims jumped for the ninth straight week*
Another 2.4 million American workers filed first-time unemployment claims last week. That brings a total of over 38.6 million workers laid off in the last nine weeks. Although 2.4 million layoffs represented the fewest number of layoffs in the last nine weeks, the highest week in history before COVID was 600,000 in the beginning of the great recession. At least we are trending down. It will be interesting to see if we begin to trend back to gaining jobs as businesses begin reopening. With consumer spending accounting for two thirds of the economy, that is what investors are expecting.

MORTGAGE RATES
*Now at record lows*
The Freddie Mac Primary Mortgage Survey released on May 21, 2020, reported mortgage rates for the most popular loan products as follows:

• The 30-year fixed mortgage rate average was 3.24%, down slightly from 3.28% last week.
• The 15-year fixed was 2.70%, almost unchanged from 2.72% last week.
• The 5-year ARM was 3.17%, unchanged from 3.18% last week.

Have a great Memorial Day Weekend!

Copyright © 2020 Kevin Tidwell Real Estate, All rights reserved.