May 18, 2020 / By Steven Thomas
Propelled by record low mortgage rates, buyers are jumping back into the housing market.
Demand Spikes: Demand surged in the past couple of weeks with a 38% rise.
COVID-19 has impacted the economy across the board. The economic data prior to the Coronavirus was pumping on all cylinders. Consumer confidence, consumption, unemployment, housing, stocks, leading economic indicators, everything was pointing to a phenomenal 2020. After the virus broke, every chart was impacted severely. Housing was no exception.
Experts have been debating what the economic recovery will look like. Initially, some experts were calling for a quick rebound, a “V-Shaped” bounce. That is when the economy rises nearly as fast as it falls. Yet, with more time to reflect on all the data, most experts now agree that it will be a “U-Shaped” recovery, one that after hitting a bottom will slowly but surely turn upward. The best analogy is a dimmer switch. As the dial is slowly turned, the economy will continue to accelerate until one day it is pumping on all cylinders again.
Housing is proving that it is an exception and is currently experiencing a “V-Shaped” recovery with demand soaring 38% in the past two weeks. How can that be? The sleeping giant has awakened. Even though life as everybody knows it has been turned upside down and California has only moved to “Phase 2,” record low interest rates are instigating demand. Dawning masks and gloves, buyers are viewing homes again and making offers.
Now that it has been a couple of months, flattening the Coronavirus curve has been successful so far. Slowly but surely more of the economy is coming back online. As a result, eager buyers who had been sitting on the fence waiting to purchase are jumping back in and ready to take advantage of record low mortgage rates at 3.25%.
In the past couple of weeks, demand (the last 30-days of pending sales) jumped from 1,172 pending sales to 1,622, a 38% rise. Demand is in recovery mode and the sharp increase indicates it is “v shaped.”
While some thought the housing market would take a major hit because of the Coronavirus, that could not be further from the truth. The low mortgage rate environment is a catalyst that has reignited demand. Despite furloughs and unimaginable unemployment, local real estate is revving its massive engine once again. A lot of people are still gainfully employed, willing, and able to purchase. With rates at a record low, home affordability has dramatically improved from earlier in the year.
Recent weeks have proven that the housing market is extremely resilient and a bright spot in the economy. Buyers can expect housing to improve from here as demand continues to rebound. This is not the Great Recession when real estate was a house of cards ready to collapse.
Active Inventory: The current active inventory increased by 5% in the past two-weeks.
Luxury End: Luxury demand surged in the past couple of weeks.