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!!
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.
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
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-
Chase stops accepting HELOC applications
Why the housing market is not as doomed as you may think