The question started coming my way right away from clients, neighbors and friends in mid March, “What do you think is going to happen to the real estate market?”.
I really didn’t know what to say as it would have been merely guessing, but I was fairly confident we were not going down the same path is the mid-2000’s. That period developed over time and had a lot of greed built in to it versus our current situation which happened much quicker and with so little known about it, even the experts were in the dark.
Speaking specifically about the real estate market, there were some bumps in the road.
First, financing was temporarily disrupted as the initial stimulus money actually caused mortgage rates to go up. Even today there is still some disruption in the Jumbo loan market.
Bruised but not broken: The state of today’s jumbo mortgage market–housingwire.com April 10, 2020
The good news is that mortgage rates on conforming loans, less than $510,400, are back to their record low levels. For areas like ours where housing is more expensive, there is a high balance conforming loan amount of $701,500, but the Fed is only backing the conforming loan market. If you are getting a loan of more than the conforming loan limit, make sure you look into buying down your interest rate. Often times this makes good financial sense.
The number of homes for sale and how to handle showing them was the next bump we experienced.
Looking at the period of 3/15/2019 to 5/5/2019 versus 3/15/2020 to 5/5/2020, we saw over a 35% reduction in new listings coming on the market in the North County Coastal market. I attribute much of this to the financial uncertainty of the time but also that home owners were concerned about their health.
Virtual home tours, gloves, booties, hand sanitizer, masks and a new “prior to entry” disclosure form became the norm. While at times inconvenient, cumbersome, and awkward, it did not seem to disrupt the homebuyers need to get out and see homes. Where we saw a significant drop in homes for sale, well priced homes for sale were still flying off the shelf. Days on the market actually dropped, averaging only 11 days for homes that went into escrow during this period. What we did not see is any drop in home values.
Home values during this time have held their own.
For the North County Coastal market I researched, the average price of home that went into escrow during the 2020 CoVid19 period to date is $731,000. Comparing this to the same period in 2019, the average price was $730,000! If we look at it as square foot pricing we see $332 per sqft now versus $325 per sqft then.
As life normalizes, I don’t think we will see much disruption in our local real estate market as long as mortgage rates stay steady.
For buyers, if you are a VA buyer or can purchase with a conforming loan amount, you will most likely continue to be in a competitive market. If you are a high balance or JUMBO loan buyer, you should see more institutional support for those products with rates coming down. Either way, you should be working with an experienced realtor who can help you navigate the current market.
If you are sitting on the fence thinking that there are going to be significant price reductions coming your way, you may want to find a comfortable fence.
San Diego homes appreciated more than those in every major Western metropolitan area except Phoenix. The comparable figures were 3.7% for Denver, 2.6% for Las Vegas, 2.7% for Los Angeles, 6.5% for Phoenix, 3.7% for Portland, 2.1% for San Francisco and 4.1% for Seattle.- Times of San Diego, February 25, 2020
For 2019 only the Phoenix market saw higher home values increases than San Diego. More recently, in February according to the San Diego Union, San Diego was trending the highest home value increase for any of the Case Schiller California markets.
Looking for an experienced realtor to guide you through the home selling or buying process? Brian Long has been selling real estate in the North County Coastal market since 2003 and can be reached at [email protected] Remember to ask him about Moov’s complimentary professional mooving services.