Wednesday, May 13, 2020 / by Mark Palermo
Every day, plans roll out to reopen our economy and try to normalize our lives as much as possible. Parks, construction, some stores, golf courses, and real estate services are examples of the loosening that our state has implemented this week. In terms of real estate, we feel the future will include significant changes that differ from the pre-pandemic experience we all knew.
Prior to Shelter In Place, buyer demand was robust and home prices were approaching historic highs again. However, on March 16th the housing market virtually stopped.
In San Mateo County alone, over 600 homes were withdrawn from the market just as the spring selling season was ramping up. But once SIP is lifted, many of those homes will become active again, causing inventory to surge.
We should add to this surge some number of homeowners who had planned to sell in the months of March, April and May but decided to wait. How many might this be?
Well, looking at historical records for San Mateo County from March 10th, 2019 through May 15th, 2019, over 1,200 homes, condos and townhomes hit the market as new listings. We can estimate that a similar number of homeowners had planned to sell this year.
So let’s break that down. Approximately 600 homes that were withdrawn will more than likely become active again soon. Plus, a majority of the 1,200 sellers who were planning to sell during the weeks of SIP decided to wait, and those may also become active soon. Now the surge amounts to around 1,800.
Looking forward to the weeks of May 15th through July 15th, 2020, we can estimate 900 additional new listings based on last year. That means, between May 15th and July 15th, a combined total of 2,600 homes could hit the market in San Mateo County alone. That’s an average of 325 new listings per week over an 8-week period compared to a ‘normal’ average of around 200 new listings per week for this period, based on the past 3 years. (See chart below).
So how would a 61% increase in inventory affect housing prices? It would likely lead to a more balanced market. Buyers who are in a solid financial situation could be in a position to enjoy more choices and better negotiating power – depending on the home.
New construction and freshly remodeled homes are always in demand, so those may maintain or even exceed the list price. Homes that were remodeled over 6 years ago may be buyers’ second choices, but those could have less competition and be easier to negotiate on price and terms. Due to higher inventory, original or fixer upper homes may accumulate extra days on market, experience price reductions, or be underbid with buyers being cautious about what the post renovation value will be.
Maybe you’ve seen national news stories that predict dark times ahead for the housing market, but things are often different here in the Bay Area. We have a tradition of bucking national trends in every way. We tend to have a robust job market, low unemployment, a plethora of intellectual capital, and a spirit that defies convention. In other words, the Bay Area continues to drive forward and re-tool, re-invent and re-emerge stronger than before.
So, the big question is: as a home buyer, is this a good time to purchase?
This depends on how confident you are with your job status, the industry, and the availability of attractive housing inventory in your target area. Most Bay Area residents would likely say that home ownership here provides a tremendous opportunity and excellent long-term investment with the potential to generate the personal and financial returns you desire.
If you’d like our opinion on your situation, give us a call!