May 4, 2020 / By Steven Thomas
Buyer demand reached a bottom a couple of weeks ago, and now it is on the rise.
Rising Demand: Demand rose 9% even though “stay at home” orders have not yet been lifted
After seven weeks of staying at home, everybody is figuring out ways to make life feel a bit more normal again. DoorDash is on the go delivering food from local favorite restaurants. Church service is now streaming live with the ability to hit pause if the two-year old is acting up. With Zoom meetings all week long, working from home in t-shirts and shorts is not a bad way to get a lot accomplished. The kids are busy cyber learning in their online classrooms. Everybody is adapting to a new way of life. Buyers are adapting as well and are looking for homes again, the market is waking up.
After reaching a low two weeks ago, Orange County had dropped to inherent, natural demand last seen during the start to the Great Recession. Yet, in the past couple of weeks a change was afoot. Reports from the real estate trenches of increased showings and buyers writing offers again were repeated all over the county. Buyers are figuring out that they can still purchase a home in the middle of California’s “stay at home” order.
The real estate industry has adapted to selling homes in this new COVID-19 environment. Buyers view properties wearing protective face masks and disposable, rubber gloves while respecting proper social distancing protocol. Everything else is done electronically, from a list of properties to a comparable market analysis to real estate contracts that grant buyers permission to view and purchase properties. As a result, it is not surprising that demand (the number of pending sales over the prior 30-days) increased by 9% in the past two weeks, growing from 1,080 to 1,172 pending sales.
Expect demand to continue to rise going forward, especially with the added inventive of record low mortgage rates. In fact, they reached an all-time low last week, dropping to an average of 3.23% across the country. With lower rates, homes become much more affordable.
Even with the large increase in demand over the past couple of weeks, demand is still muted. Demand is also off by 56% compared to last year. So, COVID-19 is absolutely suppressing demand.
Within the last couple of weeks, the inventory grew by 6%, adding 281 homes, and it now totals 4,625. Yet, COVID-19 is also suppressing the active listing inventory.
With demand increasing at a faster pace than the supply of homes, the Expected Market Time (the amount of time from hammering in the FOR SALE sign to opening escrow down the road) dropped from 121 days to 118 days, a Balanced Market (between 90 and 120 days).
For buyers in Southern California, the current environment may prove to be the best time to jump on purchasing a home given that there is no rush to act immediately and rates are at all-time lows. That may change as California’s economy is slowly opened back up. Even so, it will not be business as usual. The new adaptation to selling homes in this COVID-19 environment will continue.
Active Inventory: The current active inventory increased by 6% in the past two-weeks.
Luxury End: The luxury market is starting to improve.