Three Months of Shelter in Place, How has the Real Estate Market Reacted?

After  three months of shut down, businesses closed, jobs lost and lives changed there has been a constant rhetoric of a real estate market and the economy bounding back.  Low interest rates have been a dominant source of reason to buy; along with, it will be better.

Newspapers and other media have vacillated between good times ahead and danger in the wings.  

Here is how the dominant Silicon Valley real estate markets have performed.

In general all but two have seen sales below list.   In most instances 5-6% below list.  Homes for sale have out distanced sales.  Sales and listings have been below normal.  With the next week being a time of relaxation of rules and a return to work it will be of interest to see how home buyers and sellers will react. (CLICK THE HI LIGHTED CITIES FOR GRAPHS)

In the Five County area homes for sale have risen from 11,436 in April to 16,028 in May.  Sales have declined from 9,424 in April to 8,177 in May.

In Atherton days on the market have risen from 5 in April to 23 in May.  Price to list have dropped to 95% of list.

Menlo Park days on the market dropped from 29 in April to 3 in May and Sales to list price dropped from over 101% to just over 100%.

Los Altos had a large drop in sales to list from 103% in March to 102% in April and under 98% in May.

Palo Alto had a drop in days on the market in April of 15 to 10 in May.  Sales to list jump from 100% to almost 102% in May from a high of 106% in March.

Portola Valley had a drop in days on the market in April of 57 to 11 in May. Sales price to list dropped roughly 100% in April to 95% in May.

Woodside saw days on the market drop from 161 days in April to 21 days in May with sales price to list rising from 93% to 95% of list.

Redwood City saw days on the market increase from 9 in April to 12 in May and sales to list drop from 101% in April to under 100% in May.

The willingness of sellers to take a lower price is quite positive as it indicates a top in the rapid home price increase and the afordability factor many buyers are faced with.

'It's going to be ugly,' analyst says as mortgage rates suddenly spike on shocking jobs report
What's good news for the U.S. economy is suddenly bad news for mortgage rates. A far-better-than-expected May employment report only added to a growing sell-off in the bond market, pushing bond yields to the highest level since March. Mortgage rates loosely follow the yield on the 10-year Treasury.

Broker Price opinions have increased along with Appraisals as many owners are reconsidering the soundness of refinancing to 30-year mortgages.

Commodity prices are begining to increase as in the cost of food, gas prices and oil prices.  All sooner or later will become inflationary tools that will put the Federal Reserve on notice of how to save our economy and control inflation.

Rental prices have dropped in May some 16-19% depending on where you look.  San Francisco with 69% of housing as rental will be the point of contact for the future of rates.  When looking at Zillow for rentals in Redwood City it seems like there is a blanket of rentals available.  How long they remain so will all depnd on demand, price cuts and whether the move out of the area will continue.

The latest report of "new home" sales is most encouraging.  The interpretation is that it is time to look at newer homes out of the area once work from home becomes a dominant thought for the future.

Buyers are still recommended to remember you are buying something you will be living in 10, 20 or 30 years from now.  The near term price and economic swings will all even out as the 3% or so 30-year mortgage will become the greatest asset and buyer will have.

The near term issue is not attractive for Governor Newsom.  How does he handle the rent and mortgage moratorium to make lender, land lords, renters and home owners whole.  With the state some $54 billion in the red and the Federal Government debt expanding it looks bleak!

The May unemployment report does offer a sign of the end.  Part-time employees are a good and historic sign of an end of a recession.   Employers are more willing to hire part-time as labor laws, contracts, pensions and other impediments get in the way.  

Most economist have agreed ( not officially) that the 2020 recession will be a short one.  ( From their mouths to God's ears).  All add to reasons why buy on bad news is the best advise given.

Gary McKae

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