06/10/2020
What is happening with our Real Estate Market?
Imagine someone told you, prior to 2020, that we were going to shut down America and most of the World because of a deadly Virus. Millions were going to lose their jobs as we shut down most businesses to stop the spread of the Virus.
The same person asked you one question; “What do you think would happen to our Real Estate Market if this happened?”. Home Price Increases? No substantial changes/Status Quo? Small Slow Down? Medium Slow Down? Huge Price Drops? Dogs and Cats fighting in the streets?
I have been a Full-Time Realtor for over 30 years. I was selling homes during our 1990 Real Estate market collapse, the fears of Y2K, the tragedy of 911 and the market uncertainty thereafter. I remember the last Real Estate Boom and then the market/mortgage meltdown which began in 2005. We went from a stampede of hungry buyers and multiple offers to the lonely sound of Crickets seemingly overnight. I have spoken to many people in the Real Estate/Investment/Business arena and the opinions regarding the speed and completeness of our Economic Recovery are all over the board. From “Doom and Gloom” to “We will Bounce Back very Quickly." I am “Optimistically Cautious” on our quick recovery prognoses.
The story of 2020 is just in the beginning chapters of a very important and intriguing story. Here is what I have seen to date;
What are the Buyers up to?
The number of Home Sales is down sharply, but Home Prices have, to my surprise stayed fairly strong. The market has had enough motivated buyers and the inventory has been very low which has helped keep values strong so far. The buyers that are actively searching are cautious but their need or desire for housing is pushing them forward during this uncertain time.
So far we have weathered a tremendous storm! We have seen some recent discounts & concessions by some sellers lately but houses continue to sell well.
What is going on with Mortgages?
On the Lending side we have seen Interest Rates dive down to the very low 3% range on Conforming Loans. Rates can be acquired under 3% for the most highly qualified buyers. These Low Rates have helped keep the Lower, Middle and Upper Middle Real Estate Markets stable. The Conventional Loan Limit for San Diego is $510,400. Buyers need about 20% of the Property Value plus any amount over the $510,400 in order to purchase a property using Conforming Loan Guidelines. Non- Conforming Loans are much more Expensive for the buyer. Jumbo loans, Home Equity and Non-Owner Occupied Purchase Loans became very difficult to get. It seems there is just too much risk for Lenders to take on these riskier loans right now.
Strange Mortgage Phenomena: The Stock Market got hit hard initially when the Virus news /fears came out. The Stock Market Dropped from about 29,500 in the middle of February down to about 18,600 in early March., (that is about a 37% Drop for those keeping score). The Stock market has been rebounding very nicely and sits about 27,000 as of this writing.
The strange phenomena is that as the stock market has been rebounding, Interest Rates have been going down. This is the opposite of what generally happens when the stock market rises.
“Questions about Questions” or “Things that make you say hum”
I am an optimist and I know that America and its people are very resilient. Having said that I am cautious of being overly positive of a full and quick recovery. Here is why; I am hopeful that most of our stores, restaurants and businesses will reopen and thrive in the short and long term. However, Social Distancing and Sanitizing Requirements placed upon them could keep them from reopening fully, especially restaurants.
Here’s what really concerns me; Businesses/Stores/Restaurants go out of business all the time. We are used to seeing a store disappear from our local strip mall on a regular basis. Signs go up and a new store takes over in short order. When a store goes out of business during this Pandemic, the building space could stay vacant for a while. The jobs are lost the landlord does not get paid and no taxes are getting collected. Why you say? Who is going to open up a “Non Essential” business like a restaurant or a clothing store when you can’t even fully open it. Are banks going to loan money to entrepreneurs trying to open a store right now. Probably not unless the Government steps in to guarantee the loans in case of a future shutdown. Just sayin. But the American entrepreneur is amazingly agile and quick to adjust to the wants, needs and desires of the populous. So I won’t be surprised if new business ideas are forthcoming in the near future.
About 3.6 million Americans did not pay their mortgage payments in April; the delinquency rate has more than doubled from 3.06 percent to 6.45 percent. Over 38 Million people have filed for unemployment during the pandemic. The real unemployment rate is 22.5%; according to Fortune Magazine. Will we recover and reopen our economy in time for the home owners affected to be able to make their payments going forward or will we start to see some Distressed Home Sales?
How are we showing/selling homes during this pandemic?
We are currently using the “Real Estate Best Practices Guidelines and Prevention Plan for Showings During Covid-19,
which cover guidelines such as Cleaning/Sanitizing surfaces and Entrance guidelines & requirements to view the property .
Buyers must sign a “Coronavirus Property Entry Advisory and Declaration” form prior to entering a property to advise and protect both buyer and seller. We are making virtual tours and taking a lot of photos of listings for sale to limit the property showings to those most interested and motivated. Give me a call and I will be glad to talk to you about the specifics!
Mark Waters - Real Estate Broker (858) 449-3320
DRE #01084183
Berkshire Hathaway HomeServices California Realty
162 S. Rancho Santa Fe Rd. Ste. A-30. Encinitas, CA 92024
