12/10/2020
COVID Housing Market Update
While the housing market in California begins to exhibit signs of seasonal slowdown, housing demand continues to stay above last year’s level as interest rates remain on a downward trend. How much the state lockdown order will slow the sales momentum is still an unknown, but market participants are more prepared this time around and that should alleviate some of the negative effects the order exerts on the market.
Market Bounced Back after Thanksgiving: The market climbed back solidly after Thanksgiving, a week that is traditionally slow for housing. Weekly closed sales ending December 5, 2020 increased 31.8% from the prior week, while pending sales rose 3.5% week-over-week. In addition to the weekly increase, the state housing market had a strong start for the last month of the year, with home sales outperforming last year by more than 30 percent.
New Stay-At-Home Order Implemented: With the number of new coronavirus cases in California setting new record highs and hospital intensive care unit capacity (ICU) dropping below 15% for the Southern California region and the San Joaquin Valley, tens of millions of people in California found themselves under new stay-at-home orders starting this past Monday. The orders require the closure of businesses like bars, hair salons, museums, movie theaters and indoor recreational facilities. The orders will remain in effect for at least three weeks and will be lifted only when the projected ICU capacity meets or exceeds 15%. This will likely have implications for the housing market as renters and homeowners face associated impacts to their incomes.
REALTOR® Anticipate Seasonal Slowdown: Nearly two-thirds of REALTORS® noticed a slowdown in market activity, according to the latest weekly survey. The weekly surge from 55.9% to 64.0% was the largest since mid-September. The slowdown could be due in part to the surge in COVID-19 cases as 50% of the respondents said their clients held back from selling because of Coronavirus, the highest level in five weeks. Forward looking indicators also imply that the market is slowing as it enters the holiday season, as those who expect sales (20.9%) and listings (26.9%) to go down continue to rise, reaching the highest levels in over five months.
Pandemic Changes Buying Behavior: The pandemic has changed consumers’ housing preferences, according to the latest Annual Housing Market Survey. With remote working becoming the norm, buyers’ housing demand is slowly evolving. Since the Coronavirus outbreak, more than two of five REALTORS® (43.6%) saw a change in buyers’ preferences in the property type they want to change. Of those changes, 39% of REALTORS® who responded said their buyers are opting for a bigger home; 35% said buyers are opting for a property with more rooms; 37% said buyers are less concerned about the commute time to work; 37% said buyers are opting to live in a suburb rather than a city; 26% said buyers are opting to live in rural areas rather than cities or suburbs.
Investors Put Their Plan on Hold: With the eviction moratorium in place through at least February 2021, real estate investors have been holding off on buying until there is more clarity to the rental housing market. Results from the C.A.R.’s 2020 Annual Housing Market Survey show that there were fewer investors purchasing rental properties this past summer. In fact, the share of homes bought by real estate investors was the lowest since 2001.
COVID-19 continues to be in the driver seat and will remain the primary factor that determines the direction and the pace of the economic recovery in the upcoming months. While the housing market will likely be affected by the surge in new cases and regional shutdowns, the adverse impact should be smaller than what we observed in April-May as the market is “better prepared” this time around.
Source: California Association of Realtors.
