I’ve plopped down in front of the computer every day over the past 2 weeks, in an attempt to answer the question, ‘how has the coronavirus affected the housing market?’
Each time I start, each time I fact-check, things seem change.
I guess those changes are going to keep coming, so let’s deal with what we know today. This is about the Sacramento market in general, but my guess is this is happening throughout most of the country.
So, is the market up or down, you ask? The short answer is ‘yes is is’.
Here are some facts and observations for you to consider, while you sit there in your Spider Man pajamas:
- There have been mixed signals from the government. As we were all advised to stay home, except for certain ‘essential’ tasks and functions. The Department of Homeland Security issued a memorandum on March 16 that started with, “The Cybersecurity and Infrastructure Security Agency (CISA) executes the Secretary of Homeland Security’s authorities to secure critical infrastructure. Consistent with these authorities, CISA has developed, in collaboration with other federal agencies, State and local governments, and the private sector, an “Essential Critical Infrastructure Workforce” advisory list. This list is intended to help State, local,tribal and territorial officials as they work to protect their communities, while ensuring continuity of functions critical to public health and safety, as well as economic and national security.
- The state of California issued a ‘stay home’ order on March 19
- “Residential and commercial real estate services” was not on the list.
So that killed the market, right?
- No. There were plenty of buyers who had the means, need and desire to buy homes, and plenty of sellers who wanted or needed to sell their homes, so business continued to a large extent. According to Metrolist data, in the tri-county area (Sacramento, El Dorado and Placer), 914 sellers accepted offers on their homes AFTER that March 19 memo.
- Now, some of those had no doubt received offers prior to the memo, but 552 of those ‘pendings’ came after March 27, so we can assume that many if not most of those homes were viewed and offers written after that memorandum.
- On March 28, the memo was updated, this time including ‘residential and commercial real estate’ as critical infrastructure services.
So, that made it ok to show and list homes?
Not so fast. From the beginning, the CISA memos left it up to local jurisdictions to decide what was critical for their communities. Sacramento County did not include real estate, though El Dorado and Placer Counties did.
- As of April 7th, Sacramento County issued an updated health directive that said, “service providers that enable residential transactions (including rentals, leases and home sales) including but not limited to real estate agents, escrow agents, notaries and title. companies, provided that the services carried out comply with Social Distancing Requirements to the extent possible.
So, we’re free to get back to business, yes?
Officially, yes, as long as we adhere to social distancing and hygiene guidelines.
That doesn’t mean, however, that everyone is on board. While some take the green light and actively look for or market homes, there are others who are fearful, even angry that any one would get involved in real estate right now. Here are some stats reflecting the market activity between March 20 and April 7:
- Of the 2995 homes for sale in Sacramento /tri-county area, 1044 were listed on or after March 20.
- I already mentioned the 914 sellers who’ve accepted offers. 396 of them reported as having multiple offers, so at least 1310 offers were made during that period.
- On the other hand, since that first memorandum was issued, 318 listings were put on temporary hold. That status indicates they will come back on the market at some point.
- 331 cancelled their listings completely. Will they re-list? I’m sure some will. By the way, cancellations aren’t unusual even during a ‘normal’ market. 222 cancelled during this same period last year.
- As for prices, it’s too early to tell. Since it generally takes 30 days or so to close, most homes sales closed since March 20 likely went into contract in February or early March. I can say that for the entire month of March, the average price per square foot was $246, up by $4 per foot over the past 3 months.
So, where are we headed?
I don’t know. Just as some sellers have pulled back from the market, so have some buyers. Does that mean that we will soon see them come back, or will more pull back?
I guess it depends on how long this lasts, what happens to rates, what happens to lenders, what happens to jobs, and how much fear or confidence we feel.
We do know that people need housing, and we’ve had more people needing it than we’ve had available.
According to rental marketplace site Zumper’s SacMetro Report , Sacramento rents rose 7.4% over the past year, with an average 1 bedroom going for $1300.
According to financial data aggregator Nerdwallet, today’s average 30 year fixed mortgage rate stands at 3.25%. At that rate, a $300,000 loan would have a payment of $1306 (note that credit, debt, income and other factors can affect that figure one way or another).
Appraiser and blogger Ryan Lundquist did a recent poll, with 38% of respondents saying that they would buy a home during this pandemic, and 26% called it a maybe. Always insightful, his blog is worth a read
In the end, I take the numbers, the news, the rumors, the chats and the blogs, throw them all together and then take a guess.
I’m an eternal optimist, but also a realist. Can’t I be both? I think that once we get back to some normalcy, whatever that looks like, more buyers will come into the market, drawn by the low interest rates, and more sellers who’ve been waiting for the right time, will see this as an opportunity to cash out. Can that drive down prices? Sure it can, but with cheap money, I expect that competing buyers may be willing to offer more, since money is cheap.
If you are buyer who needs to buy soon, know that rates are low, making housing more affordable, and there is inventory out there.
If you need to sell soon, know that there are buyers out there, ready willing and able.
If you’re happy where you are and don’t have immediate plans for moving, just stay put, and we’ll wait it out.
Let’s just hope, wish, pray and do our part to help end this pandemic as quickly as possible.
Be safe out there.
Steve Heard is a Realtor based in Folsom CA
with EXP Realty of California, Inc.
DRE Lic 01368503
Reach Steve at 916 718 9577 or email firstname.lastname@example.org