Update on Covid-19 Market Impacts: May 20, 2020
It's good to know there are many signs that show California has reached a bottom across a variety of areas in mid-April. Things has begun to regain losses suffered from the shelter in place orders. We are winning the battle on the virus and the economy has begun to reopen at a gradual pace in many parts of the state. As much as we are happy about the improvement, let's still be vigilant to remember that the impacts of this crisis have been severe. Time will be needed for the economy to heal. It is likely the impact will continue to play themselves out over the next few months. As such, home sales and prices are likely to get worse before they begin to improve. But take heart, Spring always comes after Winter. Here are some key signs of recovery:
- New unemployment claims trending downward. Now is the 6th consecutive week that new unemployment claims have fallen.,
- Mortgage applications continue to improve: California has seen the number of new purchase mortgage applications increase for the past 6 weeks consecutively as well. Nationally, new loan app went from -35% in mid-April to just -1.4% last week. California also remains just 1.5% below the same period of 2019.
- Fewer REALTORS® experience buyers and sellers backing out: The percentage of buyers that have withdrawn an offer on a home declined for a 4th consecutive week to 37% from 48%. The percentage of sellers who removed their home from the MLS has also declined since mid-April as well to 47% from 57% last week.
- Showing activity now back to pre-crisis levels: Home showings increased by another 28% last week to within 3% of its pre-crisis levels and roughly 15% relative to the same point in 2019, but consistent growth since mid-April has reduced the deficit from roughly 75% one month after the SIP.
- Interest rates remain near historic lows: Last week, the 30-year fixed rate mortgage averaged just 3.23%. That is up slightly from 3.15% the previous week, but interest rates have never been more attractive.
- Closed sales continued to fall last week after record decline in April: The daily average number of closed sales dipped by 9.1% last week from the week prior. April showed the largest monthly decline in California home sales going back as far as our data in the late 1970s. However, the weekly data suggests that sales are likely to drop further in May. Praise God, I will be closing two loans & 2 listing transactions this week.
- Rebound in pending and listings lose momentum: The number of properties entering escrow has fallen statewide for the first time in 5 weeks. Much of the recent gains have been retained, but the loss of momentum in the recent rebound suggests that the past month has likely been more catch-up effect than the beginnings of a v-shaped recovery.
- Another record for retail sales declines: March, retail sales dropped another 16.4% shattering the previous all-time largest decline. A nearly 90% retrenchment last month.
- Discounts on closed sales begin to rise even though listing prices are stable: Listing prices have remained remarkably stable during the crisis thus far. However, we may be entering a phase where closed sale prices are beginning to lead listing prices down as the percentage of closed sales that were discounted increased from 46% the previous week to 51% last week.
- 4-6 million mortgages still in forbearance: The Mortgage Bankers Association reported this week that more than 8% of all mortgages are currently in forbearance that may equates to 6.4 million loans with payments that are not getting paid. This is the consequences of 20.5 million job losses, 15% unemployment, and 37 million unemployment claims can be. Recovery may be slower than expected & hoped for. Rest assured, recovery is coming if we all pull together. Together, we'll win!
This is a summary of what CAR has posted. Thank you for reading. Please like & share this with those you care about to encourage & prepare them for what's to come.