Welcome to San Diego Blog | May 8, 2020
San Diego County Housing Report | Demand Rises
Rising Demand: Demand rose 9% even though the “stay at home” orders have not been lifted.
After seven weeks of staying at home, everyone is figuring out ways to make life feel a bit more normal again. DoorDash delivering your favorite meals, InstaCart delivering your groceries, and Church service streaming in your living room. From Zoom meetings all week long to working from home in t-shirts and shorts. The kids are busy with their cyberlearning in their online classrooms while teachers create new ways to stay in touch and keep them accountable. Everyone is adapting to the new normal way of life; Buyers and sellers are included. Buyers are looking at homes virtually and learning everything there is about a home before they even get in the front door while Sellers are getting creative advice from their agents about their marketing plans to reach more people online than ever before. The market is waking up.
After reaching a low two weeks ago, San Diego County had dropped to inherent, natural demand last seen during the start of the Great Recession. Yet, in the past couple of weeks, a change was starting to trend. Showings have increased, buyers are writing offers again, and, in some cases, are in competition with multiple offers. This is not only happening in San Diego County, but is being seen across California and the United States. Buyers are realizing they can still purchase a home during the middle of Gov. Newsome’s “stay at home” order.
The real estate industry has adapted to selling homes in this new COVID-19 environment. Buyers view properties wearing protective face masks and disposable rubber gloves while respecting proper social distance protocols. Everything is done electronically, from a Zoom buyers consultation to a virtual tour of the property to real estate forms granting buyers permission to view properties to virtual celebrations at closing.
As a result, it is not surprising that demand (the number of pending sales over the prior 30-days) has increased 6% in the past two weeks, growing from 1,7830 to 1,843 pending sales. It appears as if the shock of COVID-19 and its impact on demand bottomed two weeks ago and is now on the rise. Expect demand to continue to rise going forward, especially with the incentive of record-low mortgage rates. In fact, they reached an all-time low last week, dropping to an average of 3.23% across the country. With lower rates, home become much more affordable.
For example, in looking at a $700k mortgage, the monthly payment at 3.25% is $3,046 per month. That is a $712 per month savings, or $8,544 per year, compared to where rates were in November 2018, just a year-and-a-half ago. The savings are massive, which helps explain why demand is starting to rise.
Another way we can look at the spike in demand is by looking at the number of property showings that have and are being scheduled, compared to a normal market that was not affected by a pandemic, like last year. Compared to the first week of the year, property showings in California have almost hit the 0% mark and currently sit at -0.2%. Showings have increased 68.6% since it hit the bottom on March 28th. Property showings in the USA have crested over the 0% mark and currently sit at 3.9%. Showings have increased 45% since it hit the bottom on April 12th. Considering that we are back to the same volume of showing appointments compared to the beginning of January 2020, this is a good sign that there is light at the end of the tunnel since the market had an especially strong start to 2020 compared to the previous years. Showings are still 45% away from getting back to normal, but if it continues the trajectory that it is currently on, it may recover to normal levels in a matter of 2-4 weeks.
With demand increasing at a faster pace than the supply of homes, the Expected Market Time (amount of time from going live on the market to the opening escrow) has dropped from 88 days to 85 days, a slight Seller’s Market (between 60 and 90 days). A slight Seller’s Market is where sellers get to call more of the shots, but home values are not appreciating as much. This is the first drop in the Expected Market Time since the start of the “stay at home” order back in March. From here, expect demand to continue to outpace any increase in the supply. As a result, the Expected Market Time will continue to drop in the coming weeks as buyers demand to outweigh inventory supply.
For buyers, the current situation may be present a good time to jump in the market and purchase a home, given that there is no rush to act immediately and rates are at all-time lows. However, there are 35% fewer homes to choose from compared to last year and we have seen multiple offer situations come back on appropriately priced homes.
For sellers, if selling now is important to you, pricing your home at current market values or just under is the best way to sell your home for the highest price and shortest amount of time. The best offer is always the one that will close. We are seeing multiple properties fall in and out of escrow because of job security, buyer finance problems, and cold feet. It is important for sellers to remain flexible. Lenders and banks are being pushed to their limits with the influx of refinancing applications, meaning a typical turn time of 24 hours could be as long as 72 hours. Escrow timelines should be seen as more of the target date during these times than a hard date. Now more than ever, selecting a committed, qualified, and the financially capable buyer can be the difference between selling your home one time or three, four, or even five times over. It’s also important to realize that demand outpaces inventory at this moment. This may not be the case as the state gets back to normal, or at least at the levels, they are at now. There are many would-be sellers that are sitting on the sidelines ready to sell their home and will likely flood the market at the same time.
This may change as California’s economy is slowly opened back up, but even then it will not be business as usual. The new adaption to selling homes in this COVID-19 environment will influence the market moving forward.
COVID-19 Update: Real Estate best practices.
The Real Estate industry has been rapidly adopting and implementing guidelines for conducting business. In most counties, showings should be done virtually, if possible. All activities should be completed electronically, if at all possible. For an in-person showing, only a single agent and no more than two other individuals are to be in a home at the same time during a showing. If other persons are necessary for a showing, they should wait outside in their vehicles to observe social distance guidelines. Prior to the showing, a PEAD (Property Viewing Advisory and Declaration) may be requested prior to entry & a copy of pre-approval &/ or proof of funds statement may be requested prior to in-person showing. Masks, disposable gloves, and socially distancing is advised during all showings.
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Robert Gmur | Robert@WelcomeToSanDiego.com | 949-310-5195 | www.RobertGmur.com