July 9, 2020
6 MINUTE READ
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.
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:
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?
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.
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.
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: