The Real Estate market is a dynamic arena. Although supply and demand determines much of home pricing and availability of properties for sale, home buyers and home sellers are not always motivated purely by low interest rates or being able to sell their home for more than they paid for it. We live in homes. Therefore, our perspective on what any given property is worth is different than other products in the market because we are living in the property. Different people value different amenities and aspects of a property differently. For one person, a pool in the background makes a home more valuable. For another person, a pool is an inconvenience that reduces the desirability.
When economists and real estate pundits forecast the real estate market, they examine the interconnected relationship between home prices, home buyers, sellers, mortgage rates, and the low inventory in addition to larger economic forces in the labor, bond, and stock market. The cliche of “unprecedented times” continues to ring true. March, April, and May presented unique challenges to businesses and people operating under a different set of rules. We didn’t wear face masks in grocery stores in May 2019. Real estate transactions have changed since last May too: new forms and disclosures, new showing guidelines, no open houses, and more virtual meetings.
Real Estate Market Facts in June 2020
Here are 5 facts about the housing market and economy:
1. Sellers are staying in their homes longer compared to the mid-2000s***
2. Mortgage Interest Rates are hovering in the low 3 percent, compared to approximately 4 percent in 2019* and even higher in late 2018
3. Unemployment spiked and more than 38 million Americans lost their jobs in the past few months**
4. Although median home prices went down from April 2020 to May 2020, home prices are still up from May 2019 to May 2020**
5. Number of listings and number of sales were down in April and May 2020 compared to 2019**
Differences between COVID-19’s Impact on the Housing Market compared to the Housing Bubble in 2008
Why is the coronavirus pandemic’s effect on the housing market different from the Housing Bubble and 2008 Financial Crisis? When we try to predict how coronavirus will affect the housing market, it is natural to pull from our memory the most recent economic downturn. However, pulling from our recent memory might give us the wrong idea about what will happen.
What are two things that were happening in 2008, but not today?
First – In 2008, there was an oversupply of homes
Second – In 2008, there were extremely lax lending guidelines and subprime loans
Today, underwriting standards are still very strict with lenders and qualifying for a home takes a high credit score.
We do not have an oversupply of homes, but a lack of supply! “Lack of supply relative to demand is a sure-fire recipe for increasing house price appreciation,” stated Odeta Kushi, deputy chief economist at First American Financial.*
What is your gut reaction to this information? Do you find it discouraging, encouraging, or are you neutral?
Today’s real estate market presents upsides for both buyers and sellers.
Most sellers care about what they earn selling their house.
Most buyers care about their monthly payment.
Buyers are actually paying about $200 less per month compared to last year on monthly payments according to California Association of Realtors data and research! That demonstrates how big of an impact mortgage interest rates make on monthly payment. As a home buyer, it is important to look at the home price, but also your interest rate.
The housing market has many players: lenders, home buyers, home sellers, real estate agents, and more. But you are one person in the housing market with needs and a life that determines when you need to move.
We are here for you when you do want to move.