Considering the circumstances, our April housing market came in about as anticipated. Recall that March was a surprisingly robust month in spite of the rolling shut-down of the economy mid-month. Yet pending sales, that precursor of future closings, was off its historic norm by 27% coming into April. The fact that regional sales were only down 19% may be taken as a positive sign. Probably. Kind of. After initially missing the cut, real estate was eventually deemed to be an ‘essential services’ by the powers that be, albeit with a variety of new rules, new disclosures and new mandates. Open houses are out, virtual tours are in. Loading buyers into your car for a day of sightseeing is out, meeting a single buyer at a property vacated by the owner after being sterilized is in. The old back-slapping and hand-shaking agent is out, the masked, gloved, social distancing Realtor is in.
But, in spite of the changes, the housing market marches on and it is anticipated that housing will be a leader dragging our economy back out of this pandemic induced recession. After all, coming into it economic engines were firing on all cylinders and that is expected to return as well, depending on how long this shutdown drags on. In the meanwhile, 9 of 10 of our agents have had clients hold back on a buying decision given the market uncertainty, or whether they will have a job next week. Nearly ½ of our members have had a buyer withdraw an offer during the past month, and another 1/3 have had a transaction fall out of escrow during that time – typically due to either the buyer or seller backing out or job loss removing buyer qualification. This has led some forecasters to forecast relatively stagnant price appreciation for the next 12 months, even though they anticipate a rapid increase in sales once the market opens up again. A V shape recovery is what they’re calling it, with some deferring to a U shape with a little more time at the bottom before the climb. Near record low interest rates expected to remain in place through the year should boost the recovery as we emerge from the lockdown.
Locally our sales were off 19% month-to-month (938 / 760), down in every city except San Jacinto. Sales were also down 17% from last April (920), and pending sales are down another 2% coming into May. May and June, traditionally our highest volume months, will not be stellar this year but we’ll have to see what surprises 3rd and 4th quarter bring. In spite of this hit to the economy and the challenges to the housing market, April sales volume (760) was still higher that both January (679) and February (743) of this year, so we haven’t tanked yet and, with a little luck, we may not.
In spiteof the decline in sales, our median price continued to appreciate, up 2% month-over-month ($399,293 / $405,667) and keeping a 7% lead over the same period last year ($379.111). Again, some experts anticipate a flattening of than appreciation for the next 10-16 months so we’ll see how that works out.
Inventory also declined some more, dropping another 2% month-to-month (1,515 / 1,490) taking us back to a level last seen in January 2014. Last April buyers had 2,375 homes to select from. But the slower pace of buying did push our month’s inventory up by 19% (1.7 / 2.1). Not that exciting and just goes to show what you can do with statistics.
Speaking of statistics, the percentage of our market dominated by bank-owned-homes, (foreclosures) shot up 100% this month! Last month it was 0%, this month 1%. (I’m auditioning for a job as headline writer at the Press Enterprise or statistician at County Health). Seriously, we will be keeping a close eye on distressed properties as out-of-work homeowners struggle through a variety of forbearance options, landlords face months without rental income, and business owners struggle through months being closed. Again the experts are not forecasting a significant increase in distressed properties but we’ll monitor that closely. With forbearance options stretching out 12 months for government backed loans, and eviction proceedings frozen for all or part of that time, this will be a lagging indicator that we may not see develop until late this year or early 2021.
One final statistic of interest, homes are flying off the market in record time. Average-days-on-market (ADOM) averaged just 16 days in April, down from 21 days in March and 35 days in January. Last April homes stayed on the market an average of 64 days. The average was just 9 days in Temecula and Wildomar, 11 in Murrieta. Stay well, my friends.
Gene Wunderlich is Vice President, Government Affairs for Southwest Riverside County Association of Realtors. If you have questions on the market, please contact me at GAD@srcar.org.