Real Time Market Update – a little bit of positive news
Here is the latest “Skinny on Real Estate” real-time residential real estate update. The goal of this is to keep you updated on the So Cal market based on information gathered from the major aspects of our industry during this unprecedented time. Most importantly, we hope you and those close to you are healthy and safe!!
Market Update–
After two rough weeks of very little sales activity across the board in So Cal, sales volume positively picked up this week. We had some multiple offer situations in our Westside and South Bay offices in the $1.5M to $3M range. Some of the multiples were solely based on virtual tours without any in-person showings. The market has had such poor inventory for a long time that even under these circumstances, we still have solid buyer demand.
That said, the leverage the seller’s enjoyed pre-COVID-19 has given way to a much more balanced market. The early indications from deals in-escrow with contingencies removed or deals that recently went under contract, home prices are down about 5-10% depending on the price point and location. Properties priced under $1M in good locations are faring the best while the higher end (over $3.5M) is seeing the bigger discounts…but we are still seeing high-end deals closing (Prince Harry and Megan Merkle spent around $15M for a property in Malibu- off-market) and plenty of calls/e-mails inquiring about luxury properties.
At this point (still early to make these assumptions), despite such strong economic turmoil, some real estate economists feel property values won’t take much more than a 10%-12% hit as long as we see shelter In place orders easing in So Cal by the end of May. Under that scenario, a strong 4th quarter of 2020 is projected with home values beginning to inch back up. The combination of continued expected low rates and strong buyer demand for a scarce product are the key factors in this analysis.
A survey of active luxury real-estate agents found about 45% of the respondents felt homes valued above $3M would drop 10-15% in value, 35% state a decline of 5-10% with about 15% stating prices will be similar to pre SIP orders.
A few weeks ago, Compass Westside offices were reporting that new listings were off about 30% compared to this time last year. We have seen that increase to 50%. However, quite a few e-mails are circulating amongst agents about inventory that will hit the market in June and that is when we expect listing volume to dramatically increase.
Lending-
Interest rates are holding steady on new purchases. 30-year jumbo loan rates are in the low to mid 3% range with the 7/10 year ARM in the 2.55% to 2.85% range.
Be careful when asking for a loan forbearance if you don’t really need one, especially if you may be in the market to purchase a home in the next 12 months or looking to refinance. It could create some headaches for a loan approval. Also, if you have a HELOC and could be using that money in the next few years, you should think about getting that money out. Some banks have started freezing access to that money which could become universal fairly quickly under the current economic environment.
Most of the major lenders are not going above 80% LTV on new purchases.
Nationally, about two million homeowners missed their monthly mortgage payments, a number which is expected to rise further. Approximately 3.74% of home loans were in forbearance Refinance rates are still holding higher than expected due to the backlog of files in the system but we expect these rates to drop.
Loan Article-Mortgage rates drop to 30-year low
Title-
New title orders (i.e.- preliminary title reports are typically ordered when a property goes under contract), were down over 50%-60% in the previous two weeks. This was a stronger week with title openings appearing to be off in the 35-50% range.
California is getting closer to allowing virtual notary signings. An announcement on this and the procedures that need to be followed is expected in the next few weeks.
Here are a few links to information/articles you may find useful-
By John SkinnerReal-Time Market Update + Property Taxes Due by April 10th!
Last week’s notes on the market were well received and we are going to keep this going whenever we have good information to pass along during this unprecedented time. Most importantly, we hope you and those close to you are healthy and safe and are able to implement positive ways to stay connected with each other while practicing social distancing.
Property Taxes– Property taxes are still due by April 10th! Get your payment in if you haven’t done so! Due to state law, it cannot be extended and is a hugely important source of local government revenue. However, beginning on April 11, the day after property taxes are due, people unable to pay on time for direct reasons related to COVID-19 may submit a request for penalty cancellation online. The department has set up a special team to process these requests for those who demonstrate they were affected by the outbreak. Please note, this is just to delay the penalty cost but not the actual taxes due. Here is a link to the LA County Property Tax web-site.
Market Update- Overall, March sales volume for Compass in So Cal ended up on par with last year’s numbers. The first 2.5 weeks of March were on pace to be quite a bit stronger than March 2019 but the slowdown in the last 1.5 weeks of the month balanced it out.
However, April closings will be down at least 30% compared to last year and probably closer to 40% as we won’t see very many quick closings in this environment. Unless a deal is all cash, lenders are not guaranteeing anything quicker than a 35 day escrow with 21 day loan contingency and prefer a 45 day escrow.
New listings in our offices are down about 30% compared to last year which is actually better than anticipated with city of Los Angeles barring agents from showing property, despite the state calling real estate agents an “essential” service. We are expecting new inventory to stay very light until we have a definitive light at the end of the tunnel. Thus, May closings will be lighter than April.
Once we see a light at the end of the tunnel, new listing inventory will pick up quite a bit with many people waiting out the pandemic combined with those who have withdrawn their home from the market.
Lending-Most banks are offering 90-day mortgage deferment programs. Apparently the process is fairly easy and efficient with most of the larger banks. You will still be on the hook for the mortgage payment at a later date but just gives you a three month reprieve to focus on other pressing issues in your life and it is not supposed to negatively impact your credit, but definitely confirm with your bank what program is available and the implications as they vary among banks.
The average U.S. rate for a 30-year fixed mortgage fell to 3.33% this week, according to Freddie Mac, as the Federal Reserve’s bond-buying program created demand for securities backed by home loans. It is a 17-basis point drop from last week. Mortgage applications dropped 24% last week, compared to year earlier. Rates are expected to fall further… More competitive Jumbo rates are being offered by the big banks when it comes to purchases. They are really the only players right now when it comes to jumbo loans.
As I described last week, the re-fi business is still pretty strong and they have enough of a backlog that the rates being offered are not as enticing as one would think…though this could easily change in the next month and something to keep an eye on.
Title- Sampling a few different title companies, new openings this week were off about 40-50% compared to normal levels.
Title companies can close escrows electronically but the grant deed and loan docs are still required to be notarized in person. Escrow companies and the California Association of Realtors are lobbying local country recorder offices to allow notaries to be done electronically by video, but thus far, it has not been considered.
Rental Market After checking in with multiple landlords and property management companies in terms of rent being paid at the first of the month, the average came to about 90% paying on time. They unanimously have concerns about what it will look like next month if things stay status quo.
Here are a few links to information/articles you may find useful-
Los Angeles sees rental prices fall for the first time in a decade
Los Angeles webpage explaining their eviction moratorium
Mortgage lenders are tightening standards as coronavirus crisis worsens
