While buyer demand has softened and sales fell 8.5% in March, the supply of homes on the market is contracting even faster

 

The economy is shrinking, businesses are closing and jobs are disappearing due to the coronavirus pandemic. But in the housing market, prices keep chugging higher.

Home prices plunged during the last recession after a housing crash caused millions of families to lose their homes. Home values could start to erode again, especially when mortgage forbearances end, some economists warn.

But that hasn’t been the case so far. The median home price rose 8% year-over-year to $280,600 in March, according to the National Association of Realtors. While buyer demand has softened and sales fell 8.5% that month from the prior month, the supply of homes on the market is contracting even faster, recent preliminary data shows.

“Demand absolutely just got a kick in the gut, but at the same exact time, so did supply,” said Skylar Olsen, senior principal economist at Zillow Group Inc.

 

Homes typically go under contract a month or two before the contract closes, so the March NAR data largely reflects purchase decisions made in February or January.

Even by the end of last month, many sellers were reluctant to cut prices. Only about 4% of sellers cut their prices in the week ended April 25, down from 5.7% during the same week last year, according to Realtor.com. ( News Corp, parent of The Wall Street Journal, operates Realtor.com.)

Some sellers say they are hanging tough because they believe their homes aren’t moving because buyers haven’t viewed them in person or are reluctant to make offers right now, not because the asking price is too high. They are waiting for stay-at-home orders to ease before deciding whether to lower the price.

“People really aren’t leaving their homes” to go house-hunting, said Sarah McMurdy, who listed her Bethesda, Md., house in late March and then opted to temporarily take it off the market in April due to the pandemic. “We’re not looking to fire-sale the house. We’re in no rush. We would rather wait this out.”

Real-estate brokerage Redfin Corp. said its measure of homebuying demand, which tracks buyer inquiries, was down 15% in the week ended April 26 compared with before the pandemic struck. Mortgage applications for home purchases around the same time were down 20% from a year earlier, according to the Mortgage Bankers Association.

Total listings of homes for sale, meanwhile, have hit a five-year low, while the median listing price was up 1% from last year at $308,000, Redfin said.

The housing market has been undersupplied for years. During the pandemic it may get worse. There were 1.5 million units for sale at the end of March, NAR said, down 10.2% from a year earlier. Homeowners are waiting to list their houses, real-estate agents say, because they have decided not to move or they are worried about letting buyers into their homes during a pandemic.

 

Still, some buyers are hoping for bargains. Haas El Farra and his wife were under contract to buy a house in Southern California in early March. As the coronavirus epidemic worsened, they worried they were buying at the top of the market and asked the seller to lower the price. When the seller refused, they pulled their bid and decided to keep looking for a better deal.

“Hopefully something nicer than what we were looking at will come up at an affordable price,” said Mr. El Farra, a portfolio manager.

Prices in the Midwest showed the strongest annual growth at 9.7% in March. In the Cincinnati area, homes are selling for higher than listing price, said Donna Deaton, vice president at Re/Max Victory in Liberty Township, Ohio. Large companies in the area are still hiring, she said.

“For the most part, we’re still [competing against] multiple offers just about on every single thing,” she said.

While many economists expect home sales to tumble this year, many forecasts call for prices to climb slightly or hold flat. Mortgage-finance giant Fannie Mae said in April that it expects the median existing-home price to tick up to $275,000 this year from $272,000 last year. Capital Economics forecasts average home prices this year will fall 3% compared with last year. Zillow said Monday that home prices are likely to drop 2% to 3% from previous levels by the end of the year and recover in 2021.

In a forecast released Tuesday, housing-data provider CoreLogic called for nationwide home prices to rise 0.5% between March 2020 and March 2021. CoreLogic forecast annual price declines in some cities including Houston, Miami and Las Vegas.

A major uncertainty is whether mortgage-forbearance policies will prevent a wave of distressed sales. More than 7% of mortgages were in forbearance in the week ended April 30, according to mortgage-data company Black Knight Inc., and some homeowners can get forbearance for up to a year. But homeowners could struggle to make payments after the forbearance period ends.

“In the next 12 months it’s hard to anticipate price declines because of the mortgage forbearance in place,” said Lawrence Yun, NAR’s chief economist. “You would have to see continuing job losses for a prolonged period leading to foreclosures, and even then we may not have oversupply.”

Source: The Wall Street Journal

 

It’s one thing to truly see yourself inside of a beautiful new estate in one of the most scenic places California has to offer. It’s quite another to have that viewing solely come via technology.

Such was the case for at least one buyer for Berkshire Hathaway HomeServices California Properties, which reported the closure of the sale last week.

“Someone saw (the home) virtually in New York and she has not seen the property, she has not been to the property and she bought the property sight unseen with all the virtual tours and will be closing without actually physically seeing the property,” said Kyle Kemp, district manager for Berkshire Hathaway.

The agency has shut down its local office and agents are now working remotely, conducting Zoom video conference calls or connecting digitally with prospective buyers or sellers due to the COVID-19 pandemic. Virtual home tours have become extremely popular among agencies around the nation, though there are situations in which a buyer would still be able to physically traverse the hallways and ensure that the bathroom is in the proper place before striking a deal. Those meetings are conducted with masks and gloves, customary to operations at various other businesses due to the pandemic, Mr. Kemp explained.

Berkshire initially experienced a 50% drop in the number of transactions, though listing prices have remained stable. Some sellers have become fearful of putting their house on the market due to the extra foot traffic it may entail.

“Buyers are driven by need number one, and then secondary is confidence,” Mr. Kemp said. “If they’re feeling like there’s confidence in the environment and in the economy and jobs, that creates a strong buyer market which drives our prices.

“This just created a big unknown and that takes confidence out of buyers.”

Most of the deals that fell through were deals that were put into escrow before the widespread closures or were in the middle of escrow when implications of the pandemic went into place, he said.

Over the past two weeks, things have started to turn around. The deals that have been in place are buyers since the closures “are staying solid” and Mr. Kemp said that sellers are beginning to talk about how to carry out the process.

“We just had to get around the logistics of it, but it’s all starting to come back around,” he said.

“The beauty of Santa Barbara is people want to be here.”

There is a strong demand from buyers from places like San Francisco and L.A., along with people from out of state. The biggest issue now is how to get the buyers here.

“From out of state, it’s almost impossible,” Mr. Kemp said. “We would be selling houses today if we had the buyers to get here and they’re starting to see a way to see houses, so we’re starting to see some transactions.”

Spring is typically when many sellers choose to put their homes on the market, while most families look to be settled in toward the end of summer when school resumes, he said.

While many of the digital features being offered through real estate sales will certainly remain, Mr. Kemp said he feels agents will be able to adapt in a major way once the pandemic is over.

“The beauty of real estate is that it’s a personal connection,” he said. “I think there is going to be a big drive for people to have that personal connection again. I think the agents will be more pertinent than they were prior to this to be honest with you, because so many people were pulling away to the digital world… but I think people are also seeing the need for that connection.”

As someone who has been in real estate for 30 years, including the past 12 years managing in Santa Barbara, Mr. Kemp has seen quite a bit in his time.

“I’ve been through earthquakes, floods, fires, economic downturns, foreclosures, short sales — I mean, in 30 years I’ve got a taste of it all, which is good and bad,” he said.

Having said that, events that were as devastating as the Montecito debris flow certainly hurt business, though that was a temporary setback which was followed by a successful business year.

“In Montecito, we took a 40% hit on sales and it was a while before that came back and there are still trepidations from people because the memory is still fresh. The fact is that we got around it, and by the way we had our best year ever last year.

“Even though that major catastrophe happened and the terrible things that happened because of that, the buyers came back, everything came back and we are headed in the right direction.”

The business impacts were a “small sample” compared to the current situation, though Mr. Kemp believes that buyers will again return once the pandemic subsides.

“This is a much bigger picture, but I can tell you for the most part people tend to have short-term memories,” he said. “Once things end, they tend to move on pretty quickly.”

As serious discussions continue between buyers and sellers, the big question on everyone’s mind is when the pandemic will end.

“I can never answer that questions,” Mr. Kemp admitted.

If the pandemic were to end in the next two months, things may recover quickly. If it were to last longer, bigger problems could be on the horizon, he said.

“Ultimately, the way it seems like it’s going currently is that we’re figuring out to make it work. People still want to buy houses, people still want to sell houses and we’re seeing a lot of them now saying, ‘This is the time,’” Mr. Kemp said. “I would say that if you want to sell your house in the next year, I think you’re safe to say you could probably sell it. You might want to take a little discount off the price to make sure, but it’s not a big discount right now. Six months from now? I don’t know what that picture is going to look like.”

by Mitchell White

Source: newspress.com

Real estate industry celebrates end to ZIRs

SANTA BARBARA, Calif. – In a big win for the real estate community, Santa Barbara City Council voted Tuesday night to immediately suspend Zoning Information Reports, also known as ZIRs.

Meagan Harmon and fellow council member Randy Rowse worked behind the scenes with the real estate industry to find a compromise on the issue.

“I’m proud of us,” Harmon said Wednesday. “It was a good night.”

Local realtors have been fighting ZIRs for more than a decade. They had even proposed a measure that gained more than seven thousand signatures to repeal ZIRs, which was to go on the ballot this November. The measure would lead to an off-year election costing thousands of dollars.

Now, that measure can be withdrawn as any outstanding ZIRs are suspended.

“We talked to them and found out what they needed and we saw what we needed and thought, ‘let’s present this to council,'” Rowse said Wednesday.

ZIRs began in the city in the 1970s. They require property owners to fix any unapproved work or dwellings found on a property.

But city council members say there are already enough protections for local homebuyers, and that ZIRs are costing taxpayers too much money.

“It served a purpose [when it began],” Harmon said of the program. “But under modern disclosure law in the state of California, it was really duplicative bureaucracy. And it wasn’t serving the purpose that it was intended.”

Realtors go a step further, saying ZIRs are not reliable, costing sellers thousands they shouldn’t have to pay and discouraging buyers from buying.

“They’re grossly inconsistent, they’re grossly inaccurate,” real estate agent Steve Epstein said. “And they’ve morphed into something they were never designed to be. The idea was [fixing] illegally-converted garages, second kitchens, additional units. Now it’s turned into, ‘Hey, you can’t store your trash cans along the side of the garage because it’s in the setbacks.'”

Mayor Cathy Murillo voted against the measure. She sees the move as a setback for the city.

“I acknowledge that the ZIR program has not been perfect,” she said Wednesday. “But the benefits far outweigh the difficulties. We need to protect buyers so that they know exactly what’s going on with that property.”

Murillo says she will keep a close eye on the city’s new disclosure program.

The measure will now go to the planning commission, who will hear public comments as it makes a zoning text amendment. That amendment would then return to city council for a final vote, which could happen by this fall.

Source: Keyt News

 

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