5 RUMORS THAT HAVE IT WRONG IN TODAY'S REAL ESTATE MARKET
5 RUMORS THAT HAVE IT WRONG IN TODAY’S REAL ESTATE MARKET
It’s said “Rumors go in one ear, and out many mouths”, and sidelined by coronavirus, it seems like we all have a little more time on our hands to scrutinize the mounding data and rumors thrown at us. We hear rumors regarding the real estate market, well represented by our client concerns. However, looking at the current market, signs of economic optimism persist. Undeterred by increased uncertainty surrounding fundamental indicators like consumer confidence and unemployment rates— And bolstered by favorable rates, buyers are still buying. Let’s look at the top 5 rumors we’ve heard circulating, and see if we can pinpoint market reality.
RUMOR #1: NOW IS A HORRIBLE TIME TO SELL
Market statistics actually suggest that now is one of the best times in years to sell a home for several reasons. "Given the pandemic and uncertainty it's caused, the general sentiment [among some owners] is that now is not a good time to sell your home," says Danielle Hale, chief economist at realtor.com. "Yet so far, the data suggests the opposite—that buyers outnumber sellers in the housing market, which means it's better to be a seller than a buyer.”
Lawrence Yun, chief economist at the National Association of Realtors® predicts “Multiple offers could be fairly common over the next few months.”
“As long as buyer demand remains strong, I expect the market to remain tipped in favor of sellers,” says Hale.
Reality: Contrary to the rumor that fear of coronavirus exposure, and lack of buyers is plaguing the market, those who list their homes will enjoy a strong seller’s market with potential bidding wars that could fetch top dollar for their property, like we are currently seeing in the Chico market.
RUMOR #2: HOME PRICES ARE PLUNGING
The California housing market rebounded in June with the largest month-to-month sales increase in nearly 40 years according to the California Association of Realtors.
Throughout the state, single family home prices rose 6.5% to $626,170 after the statewide median home price fell below $600,000 in May.
Existing single-family home sales totaled 339,910 in June on a seasonally adjusted annualized rate, up 42.4% from May and down 12.8% from June 2019.
“We're seeing home prices grow faster than pre-COVID-19,” Hale says. “In fact, they are on pace with the home price growth we saw this time last year.”
The reason is record-low mortgage rates. “Record-low mortgage rates boost buying power," Yun says, "and, when combined with a lack of supply, will result in higher and higher home prices.”
Homes priced below $500,000 made up 48% of total sales in May 2020, but only made up 44% of all sales in June 2020. Sales of million-dollar properties increased in market share to 18.1% in the most recent month compared with 15.6% in May 2020.
Reality: Despite rumors of plummeting house prices, median house prices are actually setting new record highs as inventory remains tight across the board.
RUMOR #3: NO ONE IS BUYING
Pending home sales jumped 44.3% in May, the largest month-over-month increase since the index’s inception in 2001 according to NAR’s Pending Home Sales Index (a forward-looking glimpse at home sales based on contract signings).
Although the economy has suffered in recent weeks, demand for housing remains strong as new mortgage applications for fresh purchases increased by more than 20% on a year to year basis, CAR reported last week.
According to Freddie Mac, mortgage interest rates dipped below 3% for the first time in 50 years, to 2.98% as of July 16.
Reality: Buyer demand remains robust. Buyers are locking in a rate that you just wouldn't even have been able to imagine six months ago, and are likely able to afford a more expensive home than they previously thought.
RUMOR #4: YOU CAN’T TOUR A HOME IN PERSON
While it is true virtual tours are now common practice, and there are precautions in place to protect our clients, both buyers & sellers, a qualified buyer can tour a potential home in person.
Reality: Yes, there are extra steps taken to weed out non-serious buyers, such as submitting a pre-approval letter, reviewing a home inspection report and filing your Covid-19 disclosure/limitation of liability form, but beyond that, an interested buyer can still schedule an in-person showing that follows social distancing guidelines.
RUMOR #5: SUBURBS ARE IN, CITIES ARE OUT
Rumors raising around the coronavirus pandemic seem to favor rural communities over larger metropolitan areas. With many working from home, there’s a notion that people could take their jobs with them to someplace that’s less populated, with less potential for high infection rates. In May, the number of views on properties with suburban zip codes increased 13%, almost double those in urban areas, according to realtor.com data.
Reality: Nevertheless this doesn't mean everyone is fleeing their city lofts to rural communities. We suspect people have more time to fantasize about country living, but picking up and leaving is just not economically feasible for most. As enchanting as remote living may seem, a 30 minute drive to your favorite restaurant is a major lifestyle change for the average city dweller— Especially when your employer is undecided whether or not you will need to return to your office in the future.
As everyone watches to see how this pandemic shakes out, there’s definitely a constant flux of encouraging news and new obstacles to overcome in this market— Yet, real estate clearly remains essential.
If you’d like to discuss your personal reality in this market, please give me a call.
Steven Depa (530) 520-8672
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