The Market Is Not Destroyed, The Market Is Different.

How Could the Real Estate Market Be Impacted by COVID-19?

The question is coming up frequently, “How will COVID-19 affect the real estate market?”

It’s a valid question. With massive job loss, stock market volatility, and uncertainty around how long our world will experience this “shut down”, there is a lot to ponder.

Taking a look at the facts can help calm any anxiety the general public feels. In our business, we look at supply and demand, lending rates, economic factors, and public emotions to get a sense about how the market will react.

Let's take a look together at these in the local Riverside, CA market.

SUPPLY & DEMAND

Professionals turn to Multiple Listing Service to pull stats that help us understand the supply and demand. This site has statistics that include the number of homes on the market as well as the number of homes sold or under contract in any given time.

JANUARY 2020

Active: 714 HOMES

Under Contract: 157 HOMES

FEBRUARY 2020

Active: 1079 HOMES

Under Contract: 576 HOMES

MARCH 2020

Active: 1658 HOMES

Under Contract: 1760 HOMES

Now we can take a look at how these numbers compare to last year at the same time.

JANUARY 2019

Sold: 1659 HOMES

FEBRUARY 2019

Sold: 1821 HOMES

MARCH 2019

Sold: 2474 HOMES

Clearly, as of March 2020, we still are experiencing a low inventory situation and expect it to continue even as a result of COVID-19. Which indicates a sellers market.

What we are finding is that buyers are still looking for homes despite the economic slowdown. Sure, our traffic and ability to see homes is down, but those families looking for homes have not changed. The activity has only been postponed a bit. 

When consulting with other real estate professionals, we believe that, because this year's top buying season has been stalled, we will see an overwhelming number of properties sold in June. 

More importantly, the number of homes offered for sale is down. In fact, it’s lower than it has been in years during this time period. People are more cautious about having people enter their home due to the COVID-19 restrictions. Buyers are being asked to take off shoes, wear masks and gloves, and tour only three at a time. Now, sellers don’t always have places to go when they leave for a showing. Things are different. But, make no mistake, sellers are still selling homes, and quickly!

For example, we listed two homes in Murrieta and Temecula last week. Both had countless showings on the first day and over-asking price offers by Monday. When supply is down, sellers win big.

But, what about buyers? Is this a good time to buy? I’d venture to say yes! Rates are at all-time historic low prices. However, buyers will have a few more hoops to go through to qualify for a home. FICO score minimums have risen to 680. And, with so much uncertainty, buyers must have employment confirmed just before the close of escrow.

With fewer buyers in the purchase arena, buyers have more opportunities to get the home of their dreams. Typically, at this time of year, it is rare for them to get the first home they bid on.

LENDING RATES

I’m sure you have heard that lending rates have dropped. And, let's clear up any confusion. Just because the Feds have dropped the rate to zero DOES NOT mean you will find a mortgage rate of zero. When the Feds announced the rate drop, it sent lenders into a spin. 

Our first drop in rates to near zero in January/February set in motion one of the largest demands for refinance and new home purchases in a decade. Already busy lenders now had to field calls from homeowners who demanded, “I want my mortgage refinanced to zero!” You can imagine the mayhem.

Despite the calls, interest drops, and economic bailouts, lenders are still producing a record number of new and refinance loans. And, buyers are able to take advantage of rates of 3% or better.

ECONOMIC FACTORS

This is NOT 2009 all over again. If you researched the economic crash of 2009, then you know that what happened last time was due to the failure of subprime mortgages. Back then, there was little or no regulatory oversight. Loans were being handed out to everyone. As home prices rose, people pulled out equity to buy depreciating assets. Then, we hit the critical time in this recession where people walked away from their homes because they had no equity. As a result of the huge foreclosure numbers, consumer confidence dropped. 

The current situation is different. Although job loss is high, we know that, at the end of COVID-19, we will all be headed back to work and resume with our lives. Currently, 30% of all U.S. households have significant equity in their home. We are not repeating the problems of the past. 

Our government is determined to help small businesses and individuals survive and thrive despite the impact of COVID-19. We will come out the other side, relatively unharmed.

CONSUMER CONFIDENCE

Although the air waves focus on the “doom and gloom” doesn’t mean we are buying it. Spend a few minutes talking to others, and you will see the upside of what we are experiencing. There is more family time and meals together, less disposable income outlay, increased exercise from home, and unique ways to socialize and connect, including online parties. 

A PROMISING FUTURE 

Overall, people are remaining optimistic and open minded about how this pandemic will yield a bigger and brighter future. All things considered, the housing market is, and will continue to remain, strong through 2020. Sure, it's “different,” but it’s not destroyed. Families are buying homes despite the “shelter-in-place” orders. After all, they need a place to live and are convinced things will get better. 

And, they will be! Take it from a professional. For more information or questions regarding the housing market in your area, contact Liz Jones at liz@jonesrealtysocal.com or connect with us online at JonesRealtySoCal.com.