Michael Rice | March 24, 2020
Over the last week, I’ve received many texts, calls and emails asking about the impact of the crisis on our local real estate market. I thought a quick supplemental Market Update would help answer some questions you may have.
I’ve spent a lot of time talking to colleagues, clients, and future buyers to get a sense of the vibe in the marketplace. I’ve also listened to several podcasts from both the real estate community and the broader business world.
Bottom line is that the vast majority of those I talk to (including future home buyers) remain cautiously optimistic about the housing market. Our typical buyers are professionals with dual incomes and relocation buyers. Many are Amgen or Amgen related. The impact on that segment of the workforce is expected to be relatively minor.
That’s not to say that we won’t be impacted. Some homes have fallen out of escrow and some sellers have taken their homes off the market. That’s to be expected. But so far, there has yet to be a panic of any kind. However many buyers are taking a “wait and see” approach to see how this unfolds, but at some point, they still plan to buy.
As agents, we are basically in a semi holding pattern. Agents are discouraged (and in many offices, banned) from holding open houses and showing occupied homes. We can still do things like inspections and final walkthroughs. We’re strongly (and rightfully) discouraged from going out and showing a bunch of houses at the moment. We can still close escrows and new home owners can schedule movers.
In spite of these changes, the market remains relatively active.
Conejo Valley market activity over the last 7 days (as of 3/24/2020):
|Listings on Hold||37|
I was pleasantly surprised to see that 19 homes went into escrow since there are so few showings right now. And I’ve been concerned that the number of cancelled escrows may spike, but it hasn’t so far. Many sellers are putting their homes on “hold” and most of those will come back on the market as soon as this is over. There may be some panic selling as buyers swoop in to grab homes at a discount from sellers who really need to sell, but have had to sit on the sidelines. That’s doubtful to be the norm though.
National Association of Realtors Forecast
I recently listened to a podcast with the Chief Economist from the National Association of Realtors. I’ve followed him for years. I would describe him as conservative rather than a cheerleader.
His take was that as long as we hunker down now and start to come out of this in the next 30-60 days, the real estate market will come roaring back. The fundamentals are strong: low rates, low supply, and new construction has lagged demand for years. The situation is much different from 2008 when subprime mortgages caused massive defaults. Today, stricter lending standards and recent appreciation will allow more home owners to keep their home even if there’s a short term unemployment spike. His belief was that the spring buying season will be pushed to summer/fall.
RECESSION ≠ HOUSING CRASH
There’s little doubt that we are heading to or already in a recession. However keep in mind that a recession does not equal a housing crash. In fact, home prices have gone up during 3 out of the last 5 recessions. You can read my blog: How will a recession impact the local real estate market.
Fact: Home prices have gone up 3 out of the last 5 recessions.
Goldman Sachs is forecasting a quick recovery:
I’m still very optimistic about our local market as long as this doesn’t drag on too long. Rates are low and demand for our area is high. Thankfully, my phone is still ringing. Prior to this crisis, the local market was on fire – the busiest I’ve seen it this early in the year in a long time. I expect the market to bounce back quickly.
Buyers are still planning to buy and sellers are still planning to sell. If we all do our part and help “flatten the curve”, we’ll get through this.
I hope that helps. If you’d like to discuss further, please let me know. And if you have any insight you’d like to share, I’d love to hear it.