What’s Going On With Real Estate?
Have you closed any transactions during SIP?
Yes! I am excited to report that after 47 days and many hours of negotiating, I just helped a wonderful family purchase their first home. It was unlike any transaction I have ever had. We experienced delays from inspectors/appraisers and we faced so many unknowns. This Tuesday, I was armed with my face mask, wipes and a signed release just to conduct the final walk through (vacant house and all done from a distance). The buyers are thrilled to be moving out of their apartment into a larger home with a massive yard. A few things to note about this transaction: the appraisal came in at purchase price, the seller was open to a price reduction, we had inspection and loan contingencies in place. Feel free to reach out to me if you want more details about this unique transaction.
Interest Rates this Week
3.25% on 30 Year Conventional Loan with 20% down.
What’s on the market?
This week in Alameda, 7 properties have Sold (2 at list price and 5 sold for above the list price). This same time last year, 14 properties Sold (2 below list price, 1 at list price and 11 sold above the list price)
What will happen to home prices/housing market in the short and long term?
I agree with my friend Jay Voorhees from JVM lending that we will likely see a decrease in prices in the short term as more buyers take a break from the market due to job changes and uncertainty. Low inventory and low rates are doing their parts to keep the prices fairly stable. Buyers who are experiencing job stability are staying in the market and taking advantage of the reduced competition and increased price flexibility.
From Jay: “If you ask the internet about “COVID-19’s effect on real estate prices,” dozens of articles surface, but all are just a bunch of hedged predictions.
This is b/c nobody has a clue what will happen to home prices. There are way too many unknowns, particularly with the FED influencing the economy so much and with so much confusion about when the economy will reopen.
Here are some factors that push prices down: (1) uncertainty and fear that keeps buyers from entering the market; (2) unemployment that keeps buyers out of the market altogether; and (3) stock market and asset declines that have zapped liquidity and down payment funds.
Here are some factors that keep prices up: (1) less inventory, as many sellers are staying out of the market; (2) lower rates, as buyers can now qualify for more; and (3) supply and demand, as household formations will continue to outpace inventory growth.
Fannie Mae: Home sales will decline by 15% in 2020 due to coronavirus, but what will happen to property prices?
The above headline links to a Market Watch column from yesterday. While the number of transactions will likely decrease, nobody knows what the effect on prices will be.
But, the column does suggest that the effect will not be significant and not long-lasting if we do see an effect.
In this CNBC interview, Quicken Loans CEO, Jay Farner, predicts a 10% decline in prices.
And Barry Habib of the MBS Highway is predicting a correction too but he thinks the market will definitely bounce back b/c of the demographic trends I have alluded to many times in previous blogs (lots of millennials hitting homebuying age).
So yes, I too think we will see a temporary correction in the portion of the housing market associated with conforming loans, and a longer term correction in the jumbo market – where rates are much higher and financing is harder to come by.
But, I side with Barry Habib and Quicken’s CEO in believing that the market will bounce back and then some b/c of lower rates, strong demand b/c of new household formations, and continued inventory shortages.”
As always, if there is anything I can do to be of service let me know.