As of June 10, while the California housing market has started to recover, it appears that recovery is slowing, not speeding up. California officially entered the recession in February, and we’ve come a long way since then, but there’s still plenty more to go.
Average home sales per day decreased in the second week of June following a modest increase in the first week, and the overall trend has been downward. Pending listings are still going up, but by less than 3% in 3 of the prior 4 weeks before June 10. New listings have been mostly flat. Two-thirds of buyers are expecting to get lower prices than they’re getting, and more of them are backing out because of financial considerations, despite high demand.
On the bright side, sellers are more optimistic. 40% of sellers believe it is a good time to sell, up from 29% in May, though still far below the pre-crisis level of 60% or more. Sellers recognize that while buyers may not have the funds they wanted, they’re still looking to buy. More buyers are applying for mortgages while mortgage forbearance has dropped from almost 1.1 million in mid-April to only 34 thousand in early June, and home showings are finally above the levels in 2019 and still going up.
Recovery has certainly slowed, but we’re going in the right direction. Now is a good time for both buyers and sellers. Call or email us and we’ll discuss business.
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According to a recent poll of readers of the Real Estate journal First Tuesday, the most optimistic recovery date from the current recession is late 2020, with 30% of respondents hopeful for a quick rebound. A quarter of respondents believe that recovery will be tied to a COVID-19 vaccine, which is predicted to arrive no earlier than mid-2021. 45% don’t expect recovery until 2022.
Benjamin Smith of First Tuesday agrees that a COVID-19 vaccine is important to recovery, but warns that there are other aspects at play. Real Estate as a business does depend heavily on in-person interactions, even though much of the work can certainly be done online or via email, and lockdowns have, without a doubt, slowed down business. Smith is careful to note, however, that the market was already on a downturn before COVID-19 hit, merely speeding up and exacerbating an impending recession. Two important factors in the downturn were falling inventory and insufficient construction.
While a vaccine can help open up agents, buyers, and sellers to safely meet up and discuss business, the underlying causes still need to be addressed, and people will need time and government intervention to recover their finances. This places recovery almost certainly later than mid-2021, and very likely further out. Fortunately, low interest rates mean buyer purchasing power will be relatively high once they regain their financial stability, meaning home prices aren’t likely to suffer as long as interest rates remain low.
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