The Corona-Virus is here. It is finally a pandemia. We are all concerned in some degree or another about our health risks, the economy, and yes, wondering if one should proceed or hold a real estate move. Are prices going to tumble or remain unaffected ? Here are some facts that may help you decide.
Duration of this unprecedented situation.
As of today, California has reported 8600 cases, 502 in Orange County, 554 in Riverside, 183 in San Bernardino, 733 in san Diego, and 3037 in Los Angeles.
It is apparent that the infection is still growing, and if social isolation is implemented rigidly, we are looking at 20-30 days to flatten the growth curve. Most businesses are going to be severely affected during this time, and non essential labor force will suffer. We are looking at a pandemia effect of 2 quarters.
Mortgage rates, at historic lows before the Pandemia, ( 3.25% and 3.50%), have increased overnight, and now are at 3.75% to 4.00%, and they seem to be all over the place. The reason for this is lenders’ lack of liquidity, and fears of a short term recessive economy. But additionally, lenders are tightening their approval conditions. (Asking for higher FICO scores, lower debt to income ratios). They are protecting themselves.
So, getting a loan may be more difficult. This will lower demand and stabilize prices.
Real Estate Activity
In view of the risks of getting infected, agents are not showing homes to buyers, and there are virtually no open houses, as owners are not allowing potential buyers into their homes. There are only “virtual showings”. This will slow demand because buyers are less likely to make an offer for a home that have only seen virtually.
So, activity for buying and selling will slow down to almost a halt. This will dampen supply.
Median Pricing of Homes Are prices going to fall ?
Prices tend to fall when economy is in risk of a recession. The US economy was good prior to March, hence this pandemia induced recession is uncharted territory, and it is difficult to predict how long it will last. A “Buyers Market” whereas buyers command the market and offer lower prices for existing properties, is technically defined as such, when the # of days a home remains unsold in the market raises above 120 days. As of today, this figure is 72 days.
In Southern California, experts believe home owners won’t be willing to give up easily their equity, and there will be fewer homes in the market. Less demand, less supply. There may be a modest decrease in home prices in the 2nd and 3rd quarters, but 2020 is projected to finish either flat or with a very modest gain of 2-3 %.
So, it is a smart idea to follow the # of days on the market to see if it rises above 120 days.
My suggestion ? Hold off on your buying or selling decision for a few weeks, but follow the “days on market closely” and decide to buy if it is a “Buyers market” and decide to sell if market is stable. But don’t wait too long, the Southern California market may rebound sooner than you expect.