A contentious presidential election, a pandemic shuttering businesses, still no stimulus approved and a volatile stock market. And yet, the real estate market is as hot as it could be. Hot, but not unaffected.
The impact these factors have had on the housing industry have primarily impacted inventory – the number of homes for sale is down 45% to last year. And what’s astounding is that the number of homes sold was only down 3.6% to last year, which just goes to show how strong buyer demand is right now. Homebuyers are out in droves, showing no sign of slowing down for the winter or beyond. They are armed with savings from their missed vacations, record-low interest rates being held down by the Fed and a willingness to pay over asking price on most properties. This buyer demand is causing home prices to soar, up 15.7% in San Diego – and we’re seeing record-breaking median home values rise month-over-month across the country. While mortgage rates remain near record lows, The Mortgage Bankers Association reports that lending standards are tightening, making it a bit more challenging for buyers to qualify. Home builder sentiment is also extremely high – the builders know, if they build it, the homebuyers will come. And yet, with all of that money to be made – inventory of homes for sale remains extremely low.
So that leaves us with two fundamental questions:
1. Why aren’t homeowners listing their properties for sale when the market is at the highest point it’s ever been?
Homeowners are concerned that they will not be able to purchase a replacement property that works for them once they’ve sold their home due to the high prices of real estate across the country.
They’re waiting until after the election. With the candidates representing such drastically different economic approaches and issues on the Ballot locally like Prop. 19 which would impact property taxes and inheritance decisions for many, it seems sellers would like to have a better gauge on the future political climate before they make a big move.
They don’t want to allow showings in their homes knowing dozens or hundreds of strangers will pass through and those visitors may or may not follow safety protocols implemented by homeowners and realtors to keep everyone safe during the pandemic.
Simple lack of motivation. They are comfortable in their homes and see it as a better investment to stay put and perhaps remodel, add on, etc…
They’ve been able to refinance to take advantage of today’s low rates and the equity they’ve built to keep their monthly housing expenses low.
Landlords are benefitting from ever-rising rents and are disincentivized to sell their rental properties.
For the few homeowners who were able to take advantage of mortgage forbearance options selling would require them to rent a replacement property, causing their housing expenses to go up.
2. Why aren’t homebuilders building enough properties to absorb demand when builder confidence is skyrocketing?
The answer to this question is straightforward – In San Diego County, there is very little land to develop. The developments that are going up in San Diego County and nearby areas have seen slow progress because, due to Coronavirus, lumber prices have skyrocketed in response to international trade issues. Additionally, while construction has been deemed an essential business, the construction sector has posted the most job losses in San Diego County of any other industry. Add that to the already cumbersome regulations and zoning restrictions across San Diego County and we can count new construction out as source of relief from chronically low inventory.
If you are a homeowner and have considered selling, but have decided to hold off for the reasons above, I would love to hear from you to discuss your thoughts on the current market.
If you are a would-be homebuyer that is facing these current market factors, I would also love to hear your experiences and thoughts about the current market.