COVID-19
What a week! We went from bumping elbows to social distancing and a mandatory stay at home order from Governor Newsome for the state of California. Malls are closed, schools moved to distance learning, and restaurants are allowing take out and delivery orders only. What a difference it has been from a week before.
Prior to the outbreak, the Los Angeles and Orange County housing market was sizzling hot. In fact, it was the hottest spring market since 2013. Multiple offers are everywhere and home prices are on the rise and inventory remains near historic low. The low mortgage interest fuel the buyer's motivation.
Then...BAM! Came the Coronavirus...cooling the housing market.
In the last two weeks when the outbreak really started to get serious and catching people's attention, the number of homes in escrow (demand) dropped about 7%. This is caused by more home falling out of escrows and less new home going into the escrow. For the first time since July of last year, the demand was less than the same month last year - we saw a 4% less pending sales. Just two weeks ago the demand in February 2020 was 12% higher than February 2019.
How quickly things change, and we are expecting the demand to continue to drop until the outbreak slows down and stay at home order lifted.
There are about 1008 homes placed on the "Hold Do Not Show" status in the MLS. Theses are sellers who didn't want people through their homes or they want to wait until the crisis is over. In addition to fewer new homes on the market, we are seeing a number of active listings declining as well.
Despite all these, the housing is not going to plummet into the abyss and bring a wave of foreclosures and short sales similar to that of 2008. Yes, housing will correct in the next week and it will be slow. How much slower depends on the duration of the outbreak and how long everyone will remain home.
(Check Out my other blog on why this is not 2008 again!)
It is important to understand that the market doesn't shift overnight from a seller's market to a buyers market. It takes time and we have a long way to go before it even tilt in favor of the buyers. The housing market must move from a seller's market (less than 90 days expected market time) to a neutral market (90-120 days marketing time) then to a buyers market. Right now we are at 52 days. In 2018 with the interest rate hit 5%, it took 9 months to go from a hot seller's market to a slight buyers market.
So what's going on in the market?
We are going to see fewer people that are "want to" buy or sell. The ones that are still on the maker are "Have to" buy or sell and that number generally remains pretty consistent throughout the year regardless of the economic condition.
In this crazy time, the interest rate remains historic low and the inventory remains low.