Coronavirus Rebound: SoCal Housing Jumps up From ‘Worst’ April
The region’s housing markets are rebounding off what arguably was the worst April in the history books.
When coronavirus-related “stay at home” orders began throttling the economy in March, house hunting dramatically slowed, and closing a deal became troublesome. It was the slowest April for sales in the six-county Southern California region — down 31% in a year — in CoreLogic’s 32 years of recording real estate data.
But since mid-to-late April, as business limitations were eased, homebuying has perked up. Low mortgage rates, fewer house-hunting restrictions, and reinvigorated consumer confidence got owners to place more homes on the market and got house hunters in a buying mood.
Various metrics show a sharp bounce off recent lows leaving local homebuying close to the pace of 2019.
More Southern California house hunters are signing sales contracts.
In Los Angeles and Orange counties, pending sales — or escrows — of existing homes jumped sharply as of May 23, up 66.7% from a month ago — the fifth-largest gain among 27 big U.S. markets studied by Zillow’s study of brokers’ listings services. Still, escrows are off 31% from a year ago.
Newly listed properties in the two counties are up 28.5% in a month, but total inventory is 29% below that of a year earlier.
In Riverside and San Bernardino counties, pending sales rose 60% from a month ago — the sixth-largest gain among 27 big markets. Escrows are now down only 2.7% from last year.
The Inland Empire’s new listings rose 12.5% in a month, but inventory is 29.6% below last year.
Californians are applying for more home loans.
In the week of May 29, California applications ran 5.5% above the year-ago level, according to the Mortgage Bankers Association. It’s the first time above 2019’s pace since March, and it’s a stark change from the week ending April 10, when applications were 49% below a year ago.
Since the recent bottom for mortgage-making, my trusty spreadsheet shows applications in California are running at a 67% faster pace than nine weeks ago. This push means homebuyers are seeking mortgages at a pace that’s 93% of the first week of March.
A turnabout tale
In March, Emile Haddad, CEO of Five Point Holdings, said “stay-at-home” orders pushed home sales at Irvine’s high-profile Great Park Neighborhoods to zero.
The company’s project on the long-shuttered airbase had 553 sales last year — that’s almost 11 a week — and in 2020’s first 11 weeks, builders on Five Point land had made sales contracts at a nearly 14-a-week pace.
But in mid-March, Haddad said he saw an economy put into an “induced coma” for its well-being: “Once the patient awakes, they should be healthy.”
Over five weeks, Great Park sales slumped to a total net loss of three sales. Then, almost as suddenly as sales slowed, buying rebounded as the economy’s reopening slowly began. In the next six weeks, 45 sales contracts were signed.
“It feels like now we’re back normal velocity,” Haddad says.
Now, the CEO isn’t ready to say the real estate market is fully back to normal. He needs even more strong weeks of sales to lower his concerns. The year-to-date sales pace, thanks to the virus, is still off 18% from 2019.
“It is early in the post-COVID-19 period to feel like there is any solid trend line in terms of home sales,” Haddad said. “It’s a good start, but if there is a second or third wave of the virus this could change again.”
Prices stay firm
A shaky economy hasn’t stopped local house hunters from paying up.
SoCal home prices were slowly rising as the pandemic took hold of the economy.
CoreLogic’s Home Price Index, based on closed sales of single-family homes, showed the biggest percentage gains of the year in April. House prices increased at a 4.9% annual rate in Los Angeles County, 3.7% in Orange County, and 5% in the Inland Empire.
And prices of homes going into escrow are up, too.
A thin supply of housing options pushed the LA-OC median listing price to $890,040, according to Zillow. That’s up 3.7% in a month, and up 6.8% in a year, the third-largest 12-month gain among 35 markets tracked.
The Inland Empire’s status as the region’s spot for housing bargain hunters likely aided its sales recovery. The median list price of $428,719 was up 2% in a month and 2.1% in a year.
CoreLogic is forecasting price drops in 41 states, with the biggest declines occurring in areas hit by downturns in tourism and oil and gas industries.
However, price drops aren’t expected in Southern California. CoreLogic Deputy Chief Economist Selma Hepp, noted the region’s wealth, low inventories, and growing numbers of millennials entering the homebuying market.
Prices instead are forecast to rise 3% in Los Angeles County by April 2021, 5% in Orange County, and 6% in the Inland Empire, CoreLogic estimated.
The price strength, Hepp said, is “quite surprising, but when you think about it, it’s also not surprising. All the fundamentals are there.”