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Will Home Buyers or Sellers Have a Hotter Summer?

July 9, 2020

6 MINUTE READ

The summer housing market has officially arrived in California. Summer is traditionally a great time for home sellers, with competition among buyers usually getting turned up a notch or two between the months of May and August. 2020, however, has proven itself to be a year that is truly the exception to the rule.

COVID-19, the global Coronavirus pandemic, has completely changed the ways in which the real estate game is played, completely turning the entire industry on its head.

Could these changes be enough to shift the California real estate market to favor home buyers?

Some experts say yes — but others say no. While the industry experts are split in their opinions, they all agree that one thing is certain: no one knows for sure just how this summer is going to pan out for the state’s real estate market. 

With this in mind, let’s take a closer look at some of the insights that will impact California home buyers and sellers the most. 

Summer is usually a strong seller’s market

It may seem like summer is usually a busier time for home sale — and for good reason. ATTOM Data Solutions recently completed a study that showed some interesting findings about home sales. Their report found that:

  • Sellers will net the largest home sale profits as the weather gets warmer
  • The months that deliver the highest sales premiums are June (9.6 percent), May (8.3 percent) and July (7.3 percent). August came in just slightly lower at 6 percent. 

The research firm says that overall, home sales that are completed in either May, June or July will usually demand 7 percent to 10 percent over market value. And while that may not sound like a lot, think about it this way: that can easily translate to approximately an additional $40,000 to $50,000 (or more) for home sellers.

So, based on historical numbers alone, it would seem safe to say that California home sellers will have a solid, strong advantage over buyers in the rest of the coming summer months. But will the COVID-19 pandemic disrupt the status quo when it comes to the summer California real estate market? 

Blame it on Covid: 2020 is going to be a difficult real estate year to predict 

Some industry experts are predicting that the coronavirus pandemic could completely shift the typical summer housing market patterns. After all, it’s nearly impossible to know for sure what type of long-lasting effects this pandemic will have on our everyday lives, including how we buy and sell homes. 

To put it simply, the real estate industry is in uncharted territory.

The longer the pandemic stretches on,  the longer those effects may be felt. Many homeowners may be forced to sell a home they wouldn’t otherwise be interested in selling, due to slowed cash flow or the loss of a job. This would lead to an increase in supply in the housing market — and when inventory goes up, prices come down. 

While this doesn’t automatically mean that homes will sell for rock bottom prices, the longer the pandemic lasts, it is likely that we still see home prices fall lower and lower. This could give California home buyers more leverage this summer than they would typically have, which could shift the power in the real estate equation. 

Right now, the national economy is still relatively strong, all things considered. But the pool of buyers will likely be smaller than usual this summer, partly due to economic uncertainty but also partly due to job loss and loss of income. This can also work in buyers’ favor, giving them the advantage in the real estate market. 

Here’s another way to look at it. Mortgage experts predict that California buyers will see a surge in buying power this summer if the mortgage rates remain low. Mortgage rates are at historic lows, and many experts predict that this environment could last through the rest of 2020, which will likely work in buyers’ favor. 

Still, sellers’ advantages aren’t to be underestimated

On the flip side, other experts insist that sellers will still have the upper hand this summer. Due to a lack of current inventory, these experts predict that the coronavirus pandemic won’t significantly change the dynamics in the housing market and shift the power to buyers. In other words, they feel that a buyer’s market is created when there are more homes for sale than there are buyers for these homes in the local market. And, right now, because of the shortage in inventory, that means the power still lies in the hands of the seller. 

COVID-19 hit all industries hard, and this includes construction, as well. In fact, in some areas, housing construction has been halted completely. Typically, the target is to have a 5 to 6-month housing supply, and today’s supply is less than 4 months. For these reasons, sellers may still have the upper hand this summer, as buyers are all competing for fewer available houses. 

Local and statewide market insights 

According to the most recent California housing market report from the California Association of Realtors, there are some interesting statistics for both California and local markets that are worth sharing. 

While inventory has increased and sales have slowed, prices have remained pretty steady. The current median price in California is $588,070, down less than 4 percent year to year. And the sales price to list price ratio remains strong at 99.7 percent — meaning that most sellers are still getting almost their full list price.

Let’s break these numbers down a little further to look at current local insights: 

  • Los Angeles Metro Area. The median sales price in May 2020 was $535,000 — down slightly from April 2020 ($550,000) but on par with May 2019. While price was pretty steady, sales were down nearly 12 percent month to month, and more than 46 percent year to year. 
  • San Francisco Bay Area. The median sales price in May 2020 was $965,000 — down from $980,000 in April 2020 and $990,000 in May 2019. Sales were also down across the board, down 6.7 percent month to month and slightly more than 51 percent year to year. 
  • San Diego Area. The San Diego Union-Tribune reported that May 2020 home sales continued to slump in the face of the COVID-19 crisis, leading to the largest annual drop in nearly 30 years. May 2020 home sales were down 40.7 percent year to year, according to CoreLogic data. This is the biggest drop since January 1991, when sales were down 41.5 percent. The median home price in May was $590,000 — down about $4,000 from April 2020, but actually up 3.5 percent from May 2019. 
  • Sacramento Area. The number of sales in Sacramento were down 40.5 percent year over year, with the number of new listings dropping 31.4 percent. Of those houses that did sell in May 2020, they spent an average of nearly 13 percent less time on the market, when compared to May 2019 (27 days versus 31 days, respectively). However, sale prices were actually up — the median sales price was up 2.6 percent and the median list price was up 2.7 percent. 

Home buying and selling in the face of COVID-19

If you’re looking for houses to buy or want to sell your house this summer, we are here to help. Find an agent or contact us when you’re ready to get started!