In May
2020, the market didn't crash like people thought it would. We're more than 2.5
months into the city lockdown, and while March was terrible for real estate in
terms of activity, April was not as bad, and in some cases, just as good as
pre-pandemic levels. In May, things were slightly better than April. Not saying
that things are back to normal or will be anytime soon, but the housing market
isn't freefalling. We are all hoping this is an indicator that the housing
market will maintain value.
QUICK
HOUSING STATS AND FACTS:
- Tiny
price drops are happening. So tiny that it's almost negligible. It's mainly
for homes that have been sitting on the market longer. The larger drop has been
within the luxury market, and for the entry level market and generally high
demand cities like L.A., prices are actually up around 2-3% from last year's
prices.
- Huge
increase in people searching online. Companies like Target have had 140%
increases in online sales vs in-store sales, and Peloton has nearly doubled
their revenue since people can't go to their gym. This isn't because technology
suddenly got amazing--it's the lockdowns and general hassle of in-person
shopping. To view homes, it can be a pain, with no open houses allowed yet, and
all visitors home must wear masks and gloves and sign an advisory. Yeah,
most people will want to do at least some narrowing down online first.
- People
are looking for larger spaces. With office work culture changed overnight,
the huge number of people now able to work from home is changing the way we
live. People are wanting and needing home offices. This generally mean upsizing
to a larger space or reconfiguring the current space. California has a lot of
tech and office jobs that allow for home-working--this is going to affect real
estate in a good way.
- People
want to live with less people. The whole roommate thing is not, how do you
say, ideal anymore--at least in the short term. People who can afford to go
solo, will now opt to do so, even if it means paying a bit more. That means
that smaller, affordable spaces will still be in demand.
- Single
family home searches are up. You have homeowners wanting to upgrade,
renters potentially thinking of buying, and apartment dwellers wanting a
detached house. This is all contributing to increased search activity. Within
this search for single family homes, searches for swimming pools, outdoor
spaces, and extra rooms, has increased.
- Very
few foreclosures, for now. The foreclosure discussion is being
had right now because of the number of unemployed people. This is something to
monitor because if these unemployed people don't find employment by the end of
the year, then you'll likely see the fall-out of this in the form of
foreclosures. However, if the unemployed start becoming employed in the next
few months, we can avoid some foreclosures. The HUGE different between the
foreclosures of the Recession of 2008 was because no one had any equity. The
issue is, while sellers have tons of equity right now, but if they're
unemployed, they're going to be forced to sell or foreclose.
- Low
inventory is keeping prices afloat. The number of listings on the market is
down 22% from the same time in 2019. A lot of sellers pulled their listings off
the market, many decided not to list in the middle of a pandemic. Median home
prices in the week ending May 16 were 3.1% higher than the same time in 2019.
There is no doubt that this is due to very low inventory. Opportunity
buyers (who want the low interest rates) are growing in number, but the
inventory is just too low.
- Days
on the market are longer. No surprise, things are sitting on the market
longer, since everything, from showings to inspections to loan applications are
taking longer.
- Mortgage
rates are still super low. This is keeping a chunk of buyers out
there.
- Mortgage
applications and rate locks are up. Buyers are taking advantage of low
interest rates. Mortgage apps and rate locks are up 18% from the same time last
year.
- Los
Angeles seems to be resilient for now. Some cities that are hugely affected
by travel and tourism, such as Hawaii and Las Vegas, have had price impacts
greater than L.A. Even NYC and Seattle have had some price hits. L.A. for now
seems to be doing ok in terms of prices. Interesting piece in LA Times about
how our urban sprawl in LA has likely led to fewer COVID cases. https://www.latimes.com/opinion/story/2020-04-26/coronavirus-cities-density-los-angeles-transit
- Sellers
still need to up their game. Buyers want a deal, and if they see a place is
not up to par aesthetically and in need of repair, then they are lowballing.
Updating is key, even if it means just replacing a kitchen countertop or
bathroom hardware. If nothing else, please declutter and stage the place.
- Rent
prices about 1% less than same time last year. No doubt the pandemic and
unrest has caused rental properties to sit longer. And people are afraid to
move. This is the immediate short term effect. However, the future is going to
be more renters than buyers, which is often the result of recessions.
- Violence and Unrest + Election Year.
With every
step forward, there seems to be another disruption. June 2020 is looking like a
strange one, with the protests and the violence that has also surfaced in big
cities. We know that cities can be resilient, and this is the hope that the
current administration and city officials will do what's best to calm things
down. Like I said, we need to take things week by week, as 2020 is already
proving to be a crazy and unpredictable year.
