Limited Inventory, Demand continues gaining momentum, Interest rates at a History Low, Plus incentives such as down-payment assistance programs for buyer are offering great opportunities to those looking to buy and sell! . . . If you are paying more than $2,500 in rent, you can afford a mortgage. Send me a message and let’s have a conversation on how to take advantage of the opportunities now available…
There are so many ways in which 2020 is not turning out the way most Americans expected. In terms of real estate, we were hurtling toward a busy spring season. All the economic indicators looked strong, boosting buyers to battle it out for a limited supply of homes. But then the coronavirus pandemic swept across the nation, upending those expectations and forcing us to reassess the year ahead.
Home sales have fallen and real estate listings dissipated as the COVID-19 pandemic made many buyers and sellers think twice about buying, selling, and potentially even moving with a deadly and highly contagious virus on the loose. But home sales will rebound in the late summer and fall, driven by millennials eager to own a home of their own, according to a revised forecast for 2020 by realtor.com®’s economists.
Markets in smaller, more affordable cities and surrounding suburbs could be particularly brisk as folks reevaluate the appeal of big-city life during a pandemic. But realtor.com also predicts the housing market will experience a second round of pain in the form of another downturn toward the end of the year.
“COVID-19 has really dramatically changed the way the housing market is going to perform this year,” says realtor.com Chief Economist Danielle Hale. “We started off with the potential for the best year in more than a decade for sales. But we’re going to see ups and downs as the market grapples with an unsteady economy. This will affect buyers and sellers across the board.”
Sales of existing homes are expected to drop about 15% in 2020 compared with the previous year. Realtor.com is anticipating 4.5 million sales this year, compared with 5.34 million last year. The company’s economic team had originally forecast, late last year, that 5.25 million sales would take place in 2020.
While many cash-strapped buyers have eagerly anticipated prices falling, triggering a real estate bonanza similar to the Great Recession, that’s not likely to happen this time around. That’s because the number of homes on the market has fallen, by about 45% in April, and so has demand from buyers. There’s no glut of for-sale homes driving prices down.
“Sellers don’t like to reduce their prices. So they decide not to sell,” says Hale. Instead, they just pull their homes off the market.
The median price for an existing home is expected to hold steady, rising by just 1.1% in 2020 over the previous year.
“Were it not for COVID-19, we probably would’ve seen prices rise in the 2% to 4% range,” says Hale. That’s because even before the pandemic, available housing fell well short of demand, pushing prices up.
Buyers shouldn’t despair. Record-low mortgage interest rates will offset some of the slightly higher prices. Rates are expected to be around 3.2% this year, down from nearly 4% last year. And they could even fall into the 2% range later in 2020, amid further financial uncertainty.
The problem is, buyers may have a harder time snagging those low mortgage rates. Lenders are requiring higher credit scores and down payments, in some cases, as the nation grapples with unemployment rates that are likely in the 20%-plus range.
Another downside for buyers is that home construction is expected to slow, exacerbating the housing shortage. Housing starts, or the number of homes on which construction has begun, are expected to drop by 11% this year. Before the pandemic stalled construction sites in certain states, realtor.com had expected starts to jump by 10% in 2020.
Where buyers go shopping could also shift in the wake of the coronavirus. Those cooped up in small apartments in pricey cities may seek out smaller cities and suburbs where they can get more square footage and a backyard for less money. And with unemployment as bad as it’s been since the Great Depression, buyers may also seek out these areas for their lower prices.
“The experience of being at home for a long period of time has everyone rethinking their priorities,” says Hale. “People are recognizing space is more important, so they’re looking for more affordable areas where they can have more space at the same price.”
A growing number of cities across Orange County have adopted temporary bans on evictions due to the economic fallout of the state’s stay at home order — which shut down large swaths of the economy — to curb the spread of the novel coronavirus.
Anaheim and Costa Mesa on Tuesday temporarily banned evictions to help provide some relief to residents and businesses economically suffering from the stay home order.
Instead of forcing landlords to comply through an ordinance, Irvine adopted a resolution urging landlords to voluntarily halt evictions during the state-mandated stay home order to combat the pandemic.
Garden Grove adopted a state of emergency resolution and a portion of it mirrors Gov. Gavin Newsom’s emergency declaration that allows cities to adopt eviction bans. However, the city didn’t adopt an ordinance explicitly banning evictions stemming from virus-related economic hardship.
Tuesday’s votes by the three city councils comes on the heels of Santa Ana’s eviction moratorium last week — the first in OC.
Gov. Newsom’s indefinite stay at home order issued last week put many people out of work across the state because it closed down “non-essential” businesses like bars, nightclubs, gyms, concert venues, hotels and scores of service industry businesses.
Unemployment claims hit an average of 106,000 a day for the past week, said Newsom at a Monday news conference, according to SFGate.
Residents and businesses in Anaheim and Costa Mesa will have to provide basic documentation to their landlords showing state-mandated business closures hampered their rent payments before rent is due.
Anaheim’s Eviction Moratorium
Anaheim residents and businesses will have eviction protections until at least May 31 after a series of amendments to the original ban, including specifically adding nonprofit businesses to the list.
Despite philosophical and political differences on the Anaheim City Council, Tuesday marked a rare moment when Councilmembers unanimously adopted an emergency ordinance barring evictions, making it effective immediately.
“In my core philosophy I’m a property rights guy,” Mayor Harry Sidhu said. “But this situation we are dealing with is unprecedented … We need to stop evictions for residents who are, during the crisis, struggling to pay the rent.”
Sidhu, who brought the eviction ban to the council, extended the original repayment time from three months to four months. The ordinance also forbids penalties and fees for back rent payments.
Although the ban was originally going to expire April 30, Councilman Jose Moreno got unanimous support to extend the sunset to May 31. And he unsuccessfully tried to extend the rent repayment period from four months to six months to lessen the monthly back rent burden of residents and businesses.
“The intent here is to protect residents today, but we also want to be thinking ahead,” Moreno told his Council colleagues.
The Census Bureau considers a four-person family in poverty if the household makes just under $26,000 a year. A single person is considered in poverty if they make $13,300 or less yearly.
Councilman Trevor O’Neil raised issues about the impact to property owners, many of whom aren’t big corporations that have large financial portfolios to fall back on, but individuals who own a property or two, he said.
“I do agree that stabilizing the rental markets is critical,” O’Neil said. “I do though have concerns about the impact of breaking a link in the chain where a property owner … still has financial obligations that have to be met.”
He said those obligations include other jobs, like groundskeepers, landscapers and maintenance workers.
Deputy City Manager Greg Garcia, responding to O’Neil’s concerns, said they’ve been tracking state and federal efforts for property owner relief, but didn’t have anything solid the city can do.
“Unfortunately, I don’t have a great answer for you right now,” Garcia said.
Costa Mesa’s Eviction Ban
Costa Mesa also temporarily banned evictions for residents and businesses suffering the economic fallout from waves of business closures in the wake of Gov. Newsom’s stay home order to help stop the spread of the novel coronavirus.
The City Council voted 5-2 to adopt the emergency ordinance at Tuesday’s special meeting with Councilmembers Alan Mansoor and Sandra Genis dissenting.
Like Anaheim, Costa Mesa’s ordinance will be effective immediately.
“We’re not taking into consideration the landlord’s mortgage, if they’re not receiving rent, how do they pay their mortgage? Are they going to fall behind on their payments? Are they going to go into foreclosure? Not everybody is the Irvine company. There are mom and pop owners,” Mansoor said.
Genis opposed the ban because she said the ordinance could put a burden on “mom and pop landlords” who are also senior citizens.
“We’re pulling the rug out from under them,” Genis said.
Costa Mesa’s eviction ban lasts until Gov. Newsom’s state of emergency executive order is lifted and residents will have four months to pay back rent without fees or penalties.
Mayor Katrina Foley said the city must provide a lifeline for residents and small businesses during the spreading economic woes.
“We have a lot of residents in this city who do not have jobs that will allow them to be eligible for the government unemployment insurance, family paid leave, sick leave, they’re just not going to be eligible,” Foley said. “We’re in uncharted territory here and we must give a lifeline to our residents, our small business owners and people who are just literally sinking right now.”
Foley wanted to extend the four-month repayment, like Santa Ana’s six-month window to repay rent, so it would decrease the amount of back rent people would have to pay each month.
“I think we’re setting people up for not being able to pay the rent as soon as it becomes due,” Foley said.
But her idea fizzled out during Council deliberations.
The council amended the ordinance to make exceptions for landlords and tenants who have agreed on a deal in writing on how they would pay the rent because of the effects of the pandemic.
Costa Mesa has roughly 41,000 households in a city of about 114,000 residents. The city’s median household income is about $79,000 with 13 percent of its residents living in poverty, according to the US Census Bureau.
Irvine’s Eviction Resolution
Irvine Councilmembers voted 4-1 on a resolution that “strongly encouraged” landlords to not evict people, in contrast to an enforceable ordinance adopted by Anaheim, Costa Mesa and Santa Ana.
The resolution relies on a section of Gov. Newsom’s statewide declaration of emergency, which allows local governments to ban evictions. But cities have to adopt ordinances to provide any eviction protections for residents and businesses.
Councilwoman Melissa Fox dissented, and said an ordinance is needed — not a resolution — to protect residents.
“It is important that this council pass an enforceable order banning convictions and that order includes everyone,” Fox said. “This resolution has no force of law as written.”
City Attorney Jeff Melching described the resolution as “choosing cooperation over regulation.”
Fox proposed rebranding the resolution as an ordinance to make it enforceable by law but did not receive Council support.
The resolution said the city could go further but held back “based on (the city’s) long history working together with its business community.” The resolution stated “key members” of the business community indicated they were open to following the resolution.
The original draft of the memo accompanying the resolution identified them as the Irvine Company and FivePoint Holdings, the two largest developers in the city of Irvine, but a later update to the memo remove their names.
Irvine’s median household income for its roughly 95,000 households is almost $101,000, and 13 percent of its roughly 282,000 residents live in poverty according to the US Census Bureau.
Instead of discussing the item, Mayor Christina Shea and Councilwoman Farrah Khan attacked Fox for her comments on her blog about the resolution. Fox was not in the council chambers for the meeting but called in from home.
“She’s just attacking me and Farrah Khan, it’s all political, it’s just a very negative and awful attack,” Shea said. “We need to focus on (the resolution) and stop the grandstanding and politicizing of items.”
When Fox attempted to respond to the comments from Shea and Khan about her post, the council majority voted her out of order and she was told she could comment later in the meeting.
Buying a home can be intimidating if you’re not familiar with the terms used throughout the process.
To point you in the right direction, here’s a list of some of the most common language you’ll hear along the way.
The best way to ensure your homebuying process is a positive one is to find a real estate professional who will guide you through every aspect of the transaction with ‘the heart of a teacher.’
The number of building permits issued for single-family homes is the best indicator of how many newly built homes will begin to come to market over the next few months. According to the latest U.S. Census Bureau and U.S. Department of Housing & Urban Development Residential Construction Report, the number of building permits issued in January was 1,551,000. This is a 9.2% increase from December.
How will this impact buyers?
New inventory means more options. Lawrence Yun, Chief Economist at the National Association of Realtors (NAR),explained how this is good news for the housing market – especially for those looking to buy:
“More construction will mean more housing inventory for consumers in the later months of this year…Spring months could still be quite tough for buyers since it takes time to convert housing starts into actual housing completions.”
How will this impact sellers?
More inventory means more competition. Yun continues to say:
“As trade-up buyers move into these newly completed homes in the near future, their existing homes will be released onto the market.”
Today, because of the tremendous lack of inventory, a seller can potentially anticipate:
A great sale price on their house as buyers engage in potential bidding wars.
A quick sale as buyers have little inventory to choose from.
Fewer hassles as buyers want to smoothly secure a contract.
Bottom Line
If you’re considering selling your house, you’ll want to list sooner rather than later. This way, you’ll get ahead of this new competition coming to market and ensure the most attention toward your listing and the best price for your house.
ORANGE COUNTY TRENDS 