Homebuying typically picks up in the spring, but with a pandemic and rapidly deteriorating economy, the long-term impacts on the housing market remain uncertain. A Zillow study released in March 2020 tracked housing trends during previous pandemics. It concluded that home sales dropped dramatically during outbreaks while home prices remained even or decreased slightly. Overall, economic activity rebounded quickly when such crises ended.
During the most recent crisis with COVID-19, housing market data suggests web traffic to Zillow, Redfin, and other real estate portals decreased nearly 40%.
Sharp drops in sales were noted in East Bay, California, where listings of homes for sale dropped by up to 70% and weekly mortgage applications in early April dropped by 17.9%.
According to Forbes.com, a study by OJO Labs found 80% of would-be buyers have delayed their real estate search or abandoned their efforts. Although it would seem homebuying has been put on the back burner, the study indicated 25% of buyers are taking video tours of available homes. The virus has deterred some buyers, but the study indicated 20% of buyers have expedited the process, with data showing motivating factors such as good deals and low interest rates. Plus, 3D home tours are helping many who are under quarantine.
Recent interest rate cuts by the Federal Reserve have driven mortgage rates down. At the same time, obtaining mortgage credit has become more difficult. For example, Chase has updated its requirements so borrowers must have a FICO score of 700 and a 20% down payment to purchase a home.
The effects of coronavirus on supply, demand, and other factors depend on location. The real estate industry on the West Coast has been hit especially hard. Several major cities have seen double-digit decreases in available homes compared to last year, including Seattle, which in January saw a year-over-year decrease in homes for sale of 27.6%. However, this pales in comparison to New York City, where new listings are down 78% and continue to decline!
Impacts in California
In Los Angeles, officials are reporting significant changes in seller behavior. Many sellers have canceled transactions altogether while many homes, brokerages say, have been removed from listings and taken off the market. Those who engage in real estate transactions are more frequently using electronic signing rather than completing documents in person. A third of California agents report sellers have cancelled open houses, demanded potential buyers use hand sanitizer or take off their shoes, or implemented other measures, according to a recent California Association of Realtors Survey.
By late April, the number of available homes was down 18.5% in the Los Angeles area, 23.1% in San Diego, and 18.9% in Sacramento, according to data from Zillow.
Other potential impacts of coronavirus on the California housing market include:
- Domestic buyers becoming more discouraged by uncertainty and recession
- Stifled demand from foreign home buyers
- Closing delays for foreign sellers
- A slowdown in new home construction
- Delayed rebound, compared to SARS in 2000
Get Real Estate Help from OakTree Law
We understand the fluctuating nature of California’s real estate market. Whether it is a seller’s or buyer’s market, you can trust OakTree Law for professional guidance and advice. As home buyers turn to technology to conduct their transactions during the COVID-19 pandemic, our Los Angeles real estate attorney can provide assistance will all kinds of legal matters. We are open for business and our team is here to help—so call us at 562-219-2979 today!