Interview by Vinay Vijayakumar, California Tamil TV
How Is “Shelter-In-Ilace” Order Impacting the Real Estate Industry?
The coronavirus epidemic really began to impact the public consciousness locally in early March when California declared a state of emergency on March 4th, and especially when the “shelter-in-place” rules came into effect on March 19th, which included restrictions on open houses and in person showings.
Let’s quickly take a look at 3 charts that shows:
- Active Listings on Market
- Listing Withdrawn from Market
- Percentage of Listings going into Contract last March
All these indicators have seen very significant declines.
The 2020 housing market heading into this spring was set to be competitive, as low inventory and low mortgage rates were a drive for pushing the high prices up even further.
Typically, the number of new listings climbs from December low to peak in spring selling season. However the fear of coronavirus impact can be seen in this graph dropping down drastically in March. Spring usually sees a very low number of listings withdrawn from the market.
Let us look at the next chart.
This chart shows the number of listings pulled off the market which has spiked. That’s when the coronavirus epidemic began to impact the public consciousness.
The 3rd chart shows that some listings continue to go into contract though the numbers are much reduced.
Note that there is a time lag - usually 3 to 6+ weeks: between a new listing coming on market, an offer being negotiated and accepted, and when the transaction actually closes sale. This means that almost all the sales price data we have, as of the first week of April, still reflects the market BEFORE the shelter-in-place rules went into effect.
In virtually all Bay Area counties, March median home sales prices were quite strong. Having said that, with “shelter-in-place” order, certainly real estate business is not as usual.
Only in early April, real estate business was deemed essential with protocols, including: having no open houses, no in-person showing unless it’s a vacant home and by appointment, virtual staging only, virtual open houses are allowed and all communication and consultation with clients must be virtual unless it’s necessary.
Please check your city or county for more restrictive local “shelter-in-place” orders.
However, with very few transactions going into contract now, prices don’t really move and with so much uncertainty in the air, it’s too early to know what the impact is going to be like.
Is It Risky to Enter the Real Estate Market Now?
There will always be homes or deals available in any market, but I believe we should not put our lives at risk, so this is not the best of times from health perspective. For those who are determined to buy a home, there is opportunity out there even though inventory remains strained. Buyers, you have less competition, and low interest rates.
Interest rates have been hovering at historic lows so you can now comfortably own a home instead of renting. Rents are high over here!
Let’s look at the chart below which shows the average annual interest rates from 1981.
In 1981, the average interest rate for 30-year fixed loan was at 16.6%. In 2018, it was at 4.7% and today it’s around 3.3%. Interest rates fluctuates dramatically. Please consult your mortgage consultant to get the accurate rate.
So if you’re in a position where you have healthy savings, reserves and down payment which is often people’s biggest obstacle to home-ownership and a job that’s likely to remain, then buying a home now could be advantageous. Seek out the ones that make sense for your situation.
I would advise you to work with a tech-savvy realtor who can help you virtually from initial consultation to closing, a tech-savvy qualified mortgage consultant who can educate you on the best loan products that are available today and get your underwriters pre-approval letter before kick-starting the home search process. Do your due diligence and only if you are 100% sure that you will write an offer for that interested property, then go and tour the home it must be a vacant home, as per our COVID-19 rules.
This is not a time, where you can just walk in for a tour and shop around. Be 100% sure! We don’t want to put anyone in a risky situation.
For those buyers who were waiting to enter the market this spring, you may be wondering what home-buying will look like later in the month, once the quarantine is lifted or even in the next year. This too shall pass! We got through many other crisis and we will again!
Buyers and sellers will return, and we may have a delayed “spring-selling” season. It’s more like a pause right now.
Let’s look at the 30+ years of real estate boom and bust cycles chart, which shows ups and downs by % changes in home prices at each turning point. It’s fascinating!
Looking at cycles gives us more context to how the market works overtime and where it may be going. Regardless of how recent cycles have played out, it is vital to understand how extremely difficult it is to predict when different parts of a cycle will begin or end.
Since 1980, market gains to new peak values have typically lasted 5 to 7 years. Except for the dotcom bubble / 9-11 adjustment, market declines / recessions have typically lasted 3-4 years. However, that doesn’t mean that present and future cycles will necessarily play out the same way.
Human beings have tried and always tries to predict the future and whether using astrologers, pundits or experts of every stripes, but we have no ability to predict the future with any accuracy. It’s still too early to know in which category the coronavirus pandemic event will fall into or takes us through.
In What Situation Should One Consider Selling Their House in the Prevailing Uncertainty?
Take stock of your financial and housing situation to measure if the time is right to make a move – be it to buy or to sell. Don’t be nervous; you don’t want to unnecessarily give up a home you love. Remember that no matter your circumstances, evaluate your current housing situation very carefully.
Work with tech-savvy realtor who can virtually give you consultation and presentation and help you draw the buyer’s attention like a program that we have in Compass.
Compass Coming Soon - Sellers can take advantage of the pre-marketing period by previewing your home to a high-interest audience as a “Compass Coming Soon”. It's the perfect time to assess pricing and gather buyer feedback – in most places, without accumulating days on market.
What Would You Like to Say to Our Viewers?
Be grateful for having a home to live in! Home is everything today for almost every single one of us – like working from home, home-schooling, home-catering, home-entertainment... every single activity is done from home. So spring clean your home and create the ambiance to feel comfortable in your own home. If you are feeling uncomfortable in your surroundings, then it is time to consider moving.
Secondly, home-owners who are impacted by the COVID-19 crisis including unemployment, business losses and loss of rental income reach out to your local County Tax Collector to find out on the availability of the property tax payment penalty waiver appeal form.
Finally, if you are in the COVID-19 hardship and need any help be it buying a meal for your family or in need of emotional support, don’t hesitate to contact me. I will try my best to help you out in any way that is within my means.