The Unexpected Coronavirus Effect is Frustrating Buyers
Things looked pretty bleak in April. In-person home showings were banned, unemployment was soaring, and there were predictions of a housing market collapse.
Sales in April were down by 50% or more in many areas.
As of May 1, we were once again allowed to show homes in person, but with new regulations in place to protect buyers and sellers.
I started getting calls from buyers who had been waiting for something to drive prices down, and from worried sellers wondering if this was it.
I must admit, I was a bit worried, too.
Then, something happened. Interest rates dropped. They had been n a downward trajectory since about November 2019, when they peaked at 4.92%, but not like this.
On March 19, the day the state shut everything down, the national average 30 year fixed rate mortgage was at 3.65%. That’s what we’d call ‘historically amazing’, but they kept falling, and as of today, the average is 3.07%. What would we call that? ‘Historically unbelievable? Irresistible?’
It’s been proven time and again that when it comes to housing, there’s nothing wrong with any house that a lower price won’t fix. I guess now I have to say that’s there’s nothing wrong with any housing market that a lower interest rate won’t fix.
All of a sudden, homes have become more affordable, while their prices are increasing. People who were renting could now buy for about what they were paying in rent.
Take Mark, for example. Last year, Mark was renting a home for $1800 per month, with his lease expiring June 30. Last June, his landlord offered to sell him the house. With rates near 4%, Mark said he was probably 2 years away from being financially ready, but was willing to pay a little more for a new 1-year lease. They agreed on $1900 per month.
This June, although Mark was willing to renew at $2000 per month, the landlord really wanted to sell. Mark met with a lender and got a rate of 2.99%. His mortgage will be $379,000, for a payment of $1596. Add in property taxes of about $410, and insurance of $75, and for $2081, Mark can buy the house he was willing to pay $2000 per month to rent.
Mark was lucky in that he had no competition. His landlord was willing to sell directly to him for a fair price.
Most other buyers aren’t so lucky. They have to compete. Since May 1, the Sacramento region has seen an explosion of buyer activity.
1444 homes went ‘pending sale’ in May and 1898 in June in Sacramento County alone.
June’s figure of 1898 pending sales was an increase of 18% from June of last year, and at the same time inventory was down 34%.
It seems that sellers are staying put. It could be that they are afraid to show their homes during the pandemic, could be that they are afraid prices might fall, or maybe they just love where they live, or have no need to move.
Whatever the case, for many of those who do decide to sell, they find that if they price their homes right, they are getting multiple offers, and quickly.
58% of currently pending sales have reported multiple offers.
Although the hottest sellers seem to be the sub-$400,000 category, every community is having its own challenges with homes selling fast, and a lack of inventory.
Take for example, the fact that there are 94 homes for sale in Folsom today, and at this time last year, people were complaining about the lack of inventory because there were only 150 to choose from.
116 went pending in June, 56 of which were on the market 10 days or less.
Prices are reflective of this renewed demand. The average price of a Folsom home last month was $664,000, compared to $584,000 just a year ago. That doesn’t mean that $584,000 houses are now going for $664,000, but rather, with little inventory and low rates, buyers are purchasing more expensive homes than they would have a year ago.
So, what’s the upshot of all of this? If you are a buyer, be prepared to strike when you see the home you and, and be prepared to set yourself apart with a strong offer.
Unless a house has been sitting on the market for months with no offers, which indicates it may be over priced, if you love the house, and it’s priced right, make a strong offer.
Low-ballers won’t even get a response.
I just consulted with a new buyer. He had previously worked with another agent. When making an offer, he went 20% below, intending to negotiate.
The listing agent didn’t bother responding. They have offers over asking.
That’s what we’re dealing with. Get real or you won’t stand a chance.
If you are a seller were waiting for the right time to sell, this might be it. The demand is there, and homes are more affordable, so this may be your best opportunity.
We have new procedures in place to eliminate unqualified buyers and ‘Looky Lou’s’ from coming into your home, and if you price it right, you can sell it quickly.
That’s it from the cheap seats.
Any questions? Want to know what your home is worth? Interested in getting out there and buying? Drop me a line.
Steve Heard is a Realtor with EXP Realty of California, DRE#01368503, and is the owner of MyFolsom.com – Contact Steve at 916 718 9577, or steve@theheardgroup.com –