By now, most California counties have begun to lift restrictions and we will start to see the housing market steadily recover. The California Association of Realtors (CAR) recently released survey data sampling California agents and their clients over the last week of May. While many Buyers are hoping to see a decrease in home prices, East Bay median home prices did not decline enough for sellers to cut the listing price. The sale-to-list prices have been consistent; buyers and sellers are negotiating the final sale price in line with the list price.
Weighing in on the subject in his June market update, Jordan Levine, Deputy Chief Economist at CAR, said: “We [now] expect some price impacts eventually as a result of some of the negative economic impact. . . . The price impacts will be in the modest category of the low single digits for 2020.” Evidence supports this idea as the housing supply has declined more than buyer demand as sellers continue to hesitate and withdraw listings from the market.
While sellers continue to grapple with the state of the market, California is again facing a major housing shortage, which prevents prices from dropping. The CAR survey showed that in May, California mortgage applications for home purchases (as opposed to refinances) rose significantly from April and are only down 1.7% from this time last year. Mortgage applications correlate with buyer intent to purchase a property and indicate the number of homes under contract and sold. The decline in inventory is also due to an increase in buyer demand; homes under contract have increased steadily since the phased reopening of the economy began. They have risen well past pre-pandemic levels in early March.
All of this is welcome news. The May data assures homeowners that their home equity is still intact as restrictions begin to lift. It should also encourage buyers who may have been delaying a home purchase to enter the market. Over half of the California realtors surveyed indicated that they had at least one client that was delaying buying or selling until conditions changed. We assume that this pent-up demand will give way in the coming months to more participation and market activity from both sides.
Alongside pent-up demand, there are the changes to daily living which may impact home purchasing decisions in the future. In order to ensure employee safety, companies have massively shifted toward a remote workforce, which creates new space requirements for potentially millions of Americans. As a result, millions of Americans may need to consider purchasing a new home that better accommodates work from home. Remote work also means employees can live almost anywhere.
Looking ahead to July, we anticipate housing market activity to increase as demand returns from both sides, low rates continue and new housing requirements develop as employment shifts. We will closely monitor the evolving state of the market to make sure that our clients are pricing and negotiating to get the most value out of their transactions.
As always, Arrive Real Estate Group remains committed to helping our clients achieve their current and future real estate goals. Our team of experienced professionals would be happy to discuss the information we’ve shared in this blog. We welcome you to contact us with any questions about the current market or to request an evaluation of your home.