COVID-19: Pandemic impact on CA housing market by Jesamine D.
What a year. The novel coronavirus has caused destruction in its path across the world. For California, home sales have fallen to its all time low. The lowest level reached since the Great Recession in 2007. According to the Federal Reserve, the economy is estimated to shrink by 6.5% this year, the deepest plunge on record since World War II. With businesses slowly opening up, avid buyers and sellers are returning to the market.
Earlier in March, Gov. Gavin Newsom, along with other national constituents, announced placement of the “safer at home” order. Shortly after, the Federal Reserve took the initiative to lower mortgage rates to 0-0.25%. Rates haven’t been that low since their previous effort to stabilize the economy in 2007. With the initiative in place, many buyers are taking advantage of historically low rates for their forever home. Even the payment of median-priced homes has fallen roughly $300 cheaper per month, in comparison to last year.
Pandemic Progression
According to the California Association of Realtor’s recent COVID-19 impact report, we should see a full recovery in the economy by mid 2021 or later. Recovery is in progress, just at a slightly slower rate. In midst of the pandemic, progress has been made since its boom in early March. Only 9% of respondents reported withdrawn offers, 34% had a listing appointment and 29% listed a property in the same week.
“The sharp sales drop in May was the steepest we’ve seen in some time, but there are encouraging signs that show the market is recovering and should continue to improve over the next few months,” said 2020 C.A.R. President Jeanne Radsick, a second-generation REALTOR® from Bakersfield, Calif. “With pending home sales up a stunning 67 percent in May, buyer demand is on the upswing amid record-low rates that are making monthly mortgage payments $300 less than a year ago.”
Historically Low Sales Record
A sharp decline in May sales decreased 13.9 percent from 277,440 homes in April and 41.4 percent from a year ago, when 407,330 homes were sold annually. The devastating decline hasn’t been this low since the Great Recession. With most of the impact affecting the Bay Area and Central Coast, SoCal and the Central Valley also experienced declines in excess of 35%.
Median Home Value Drops 3 Percent
California’s 98-month year-over-year price gain streak was broken in May. With lower demand for housing, the median home price of $588,070 fell 3%, when the May 2019 median price was $610,940. With much of the world under a complete lockdown, less buyers were showing interest. However, the re-opening of the economy and businesses should bring a fair amount of excitement for new and experienced investors, especially if they want to take advantage of record-low rates.
In an additional effort to evaluate our current housing market, C.A.R. conducted a survey with Google. Here, they found that 40% of consumers think it’s a great time to sell, an increase from 29% last month, yet a decrease from 51% a year ago. With an economic struggle comes eager and willing investors. Consumers who think it’s a great time to buy make up 32%, an increase from 29% last year.
30 Percent of Americans Missed their Housing Payments
As businesses shut down, its employees also were at a loss. This pandemic caused over 45 million Americans to lose their jobs and file for unemployment. With no job and inability to work remotely, many renters and mortgaged homeowners missed payments. About 37% of renters and 26% of homeowners are concerned they will face eviction or foreclosure in the next 6 months.
According to a survey by Apartment List, 3 in 10 Americans missed their June housing payments. In contrast, 24% were able to make a full payment in April, rising to 31% in May and falling slightly to 30% in June.
Fannie Mae & Freddie Mac Extend Foreclosure Moratorium
As of June 17th, the Federal Housing Finance Agency announced that they will be extending their single-family moratorium on foreclosures and evictions until at least August 31. The moratorium extends support to Enterprise-backed single-family mortgage holders who are in risk of losing their home. This is an improvement compared to its previous date of June 30th.
With the world returning to normal, the real estate market is also expected to pick up its pace. Avid buyers looking for a bargain have been waiting for an opportunity like this since 2007. If able to meet lending requirements, they could get a deal of a lifetime.