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Southern California housing was on track for record spring before outbreak

April 28, 2020

Home prices hit record highs in Los Angeles and Orange counties in March and tied the record in San Diego County and in the region as a whole. Then the coronavirus pandemic hit.

By Jeff Collins

A routine report released Tuesday, April 28, paints a picture of a housing market that might have been, but thanks to the coronavirus outbreak, is no more.

Until March, the Southern California market had been booming, with home prices on track for another record-breaking year.

“We started with an absolute bang, absolute gangbusters. All my listings sold with multiple offers,” said Holly Danna, an agent with Douglas Elliman in Manhattan Beach. “Then with the pandemic, it kind of changed everything. It stopped everyone dead in their tracks.”

A new housing report by real estate data firm CoreLogic confirms that March, at least, was a solid month.

The median price of a Southern California home — or price at the midpoint of all sales  — was $550,000 in March, CoreLogic numbers show. That’s an increase of $35,000, or 6.8%, from a year earlier, and it tied the record set in December.

Additionally, 18,735 houses, townhomes and condos sold last month, up 3.5% from last year‘s tally.

The numbers reflect transactions signed in January and February “when the economy was still strong and supply was still limited. Interest rates were falling, too,” said Richard Green, director of the USC Lusk Center for Real Estate.

The COVID-19 crisis reduced activity by more than 50% since a stay-at-home order on March 19 shuttered bars and amusement parks and made in-person open houses a memory.

New sales contracts for existing homes are down 48% in the four weeks ending April 16, according to ReportsOnHousing.com. Escrows fell to 8,646 homes in the six-county Southern California region.

ReportsOnHousing’s “market time” measure shows how the market quickly slowed. It now theoretically takes 108 days for a typical home to go from listing to escrow, vs. 54 days just four weeks earlier.

Massive job losses mean fewer house hunters as 3.35 million Californians filed for unemployment claims in the five weeks ending April 18, according to the U.S. Department of Labor. In the heat of the Great Recession, 3.88 million unemployment claims were made in all 52 weeks of 2009.

California’s consumer confidence index dropped to a six-year low in April, falling to 75.2 for April vs. 107.5 in March and 116.7 a year ago. This was the biggest one-month drop in the index’s 13-year history.

A pre-pandemic world

The March home closings “reflect a pre-pandemic world,” said Ralph McLaughlin, chief economist for Haus Inc., a co-investment firm that helps residents buy homes. “April’s numbers will be the ones to really watch out for with respect to the impact of the Great Lockdown on the Southern California market.”

Agent Noe Blanco described a series of obstacles that surfaced in the past month mainly due to increased mortgage finance standards. Non-traditional mortgages have vanished, minimum FICO scores have gone up and lender appraisals appear to be lower than in past months, he said.

“Deals are closing, but it’s taking longer,” said Blanco, an agent withRe/Max Alliance Group who handles transactions in L.A. County and the Inland Empire. Blanco, who works from home to avoid the virus because his wife is eight-months pregnant, has yet to sell a home since the lockdown began.

“We have to come up with a different strategy now. You can’t do face-to-face selling. You have to do it over the phone. Or stand at a distance,” he said. “When you sell, there’s always a bond. With distancing and phone calls, where is the chance to make someone your friend?”

Less competition

Stefanie Leal, a Keller Williams agent in Yorba Linda, said her city now has 121 homes for sale and 64 in escrow, or just over half the pre-lockdown days. But somehow, business is getting done — only clients, agents, inspectors and notaries are all wearing masks, gloves and shoe coverings and standing at least 6 feet apart. But it’s a great time to buy, she said, because there’s less competition and the 30-year mortgage rate was 3.33% as of Thursday — the fifth-lowest rate in 49 years.

“When is the homebuyer going to see almost no competition and rates in the low threes?” Leal said. “I don’t think it’s ever going to happen again.”

Economists foresee sales declines in the months ahead, but don’t expect prices to drop.

A Haus forecast predicted home price appreciation will fall to 1% to 2% in Southern California by the end of the year, but prices won’t go down.

Open house and web listing views plummeted at the end of March and into early April, but the number of homes for sale also tanked, McLaughlin said.

“We expect this shift to keep the housing market relatively balanced throughout the remainder of the pandemic,” he said.

Danna, the Manhattan Beach agent, said she is advising her clients not to drop their prices.

“Sellers have to dig their heels in and hold on because there are many opportunistic buyers who are going to price gouge,” she said.

CoreLogic’s report for March shows sales up in every county except for Los Angeles and prices up across the board.

The median price for resale houses and resale condos hit all-time highs regionwide, at $576,000 for houses at $475,000 for condos.

The median home price also set records in Los Angeles and Orange counties and was tied for the all-time high in San Diego County.

Prices have yet to get back to 2006 levels in Riverside and San Bernardino counties.

Here is a breakdown of prices and sales by county for closed sales in March and year-over-year percentage changes:

L.A. County: $640,000, up 6.8%; 5,684, down 1.5%.

Orange County: $755,000, up 4.9%; 2,795, up 6.1%.

Riverside County: $405,000, up to 5.2%; 3,640, up 8.5%.

San Bernardino County: $363,091, up 8.4%; 2,493, up 4.7%.

San Diego County: $590,000, up 6.3%; 3,360, up 4.3%.

Ventura County: $585,000, up 0.4%; 763, up 4.1%. (Estimated based on counts from other counties.)

The original article can be found here.