1. Fear in Buyers doesn’t help Seller’s Pocketbooks—-The Corona Virus is causing unusually high levels of fear! Like we haven’t seen in years! When Disneyland, one of Southern California’s largest tourist destination, is willing to shut its doors and lose out on millions of dollars of revenue, people think the world might be coming to an end. The images of grocery stores being completely wiped out of groceries and cleaning supplies are creating a hysteria that, could very possibly, be worse than the virus itself! With this, sellers who are on the market, or deciding to get on the market, are going to be more flexible with the offers they review. In the last 2-3 weeks since the Corona Virus has taken up such a large part of the daily news, sellers are willing to look at different things than they were just a few months ago. They are now open to FHA and VA programs and if appraisals come in short, sometimes they are willing to make up the difference. Finally, there are sellers who are out of touch with what is currently going on.
2. Unrealistic sellers can muddle the waters buy allowing overpriced listings to sit on the market—Those sellers who are Still not adapting to the current reality of the Corona Virus effect will further erode the selling marketplace. 29% of listings failed (Expired or Cancelled) in 2019; More will happen in 2020. More expired listings in 2019 than 2017, 2018— a bad trend
3. Our previous “Seller’s Market” was propped up by International Buyers….most of those have gone away— International slowdown and monetary policies- The OC Register notes that Chinese and Asian tourists normally spend more in California and L.A. than the national average, but with travel restrictions will cause a revenue loss of $1.8 billion in California and $1 billion for L.A. alone. China Trade War- (OC Reg) There has been a slow movement of goods between the Southland Ports and Los Angeles International Airport, early signs of a larger trade war to come.
4. Buyers, when confronted by scary things, act like frightened sheep—-they huddle together and don’t move—Uncertainty- How long will this all last? Who knows? It depends a lot on how well everyone adapts to the “new reality” and conforms to our new societal rules. From what our governments just mandated (school and restaurant closures, limits in gathering sizes, etc) in the last week, it will definitely have an impact upon our economy. And the old adage: “as the economy goes, so goes housing” holds truer now than ever. Most economists are saying that we are now in the first days of a recession. But how bad it is will depend upon how long this “social distancing” lasts. If it ends in 2-4 weeks, the effect should be muted. If it lasts between 1 and 2 months, it will mean we will lose a lot more jobs and the economy will suffer more severely. If it goes on from 3 months to 6 months, most economists will agree that we will see a consequential downturn in our entire economy, and housing prices will suffer. “I’ll Just Wait” is the death knell to any housing market—If buyers are given too much to think about, too much to worry about and too much to stew about, they will simply maintain their posture of “Fence Sitting”—essentially transforming what was once a vibrant seller’s market into a buyer’s market where pricing is headed south.
5. Housing surplus forecasted in the near future— Inventory of homes for sale is projected to go up. Just withing the past two weeks, there has already been a 3% increase in current active inventory, explained in the OC Housing Report by Steve Thomas. Jim Doti says that within a year we will see active homes for sale DOUBLE! This projected flood of new homes on the market will mean that the length of time to sell will go up…dramatically. Not good for sellers. The longer a home sits on the market, the worse the eventual price will be.
6. A New Generation is less likely to buy—-Millennials are more likely to rent than buy. This cuts off an entire sector of potential home buyers. Many are more into the “lifestyle” they are creating for themselves, not truly knowing where their next move will take place, making renting the perfect fit for them.
7. Because of recent climbs in housing prices, fewer buyers can afford the median-priced home in So Cal. Affordability Index is likely to drop – reducing # of buyers who can afford to pay Orange County prices
8. Investors are slowly abandoning Real Estate Market – when a market shifts, investors typically stay away because they can’t immediately project the exact appreciation rate over the short term. That’s really good for the “regular Joe and Mary” type of home buyers.
9. Interest Rates are CRAZY low….and likely dropping more. The Fed last weekend just dropped the “Overnight lending Rate” to close to Zero % and is buying $70 Billion to $200 Billion in mortgage securities which further ensures that interest rates will stay this low and might even drop further. This will bring a brand-new load of buyers into the market because they will be saving a large amount of money in their monthly payments. This can’t last forever. So putting your home on the market sooner is likely better than later. Selling while buyers can still afford the monthly payment is very wise.