With the COVID-19 crisis unfolding, supplies are being wiped out as fast as shelves can be restocked. With President Trump declaring the virus a national emergency, the flood of people going after food, toilet paper, and hand sanitizer doesn’t seem to be slowing down.
Today, both Los Angeles and San Diego made the decision to shut down their schools for at least two weeks as California makes efforts to slow the spread of the novel coronavirus. Los Angeles Unified School district is the second-largest in the nation, and both districts combined serve over 750,000 students.
Social distancing measures are starting to become the norm in communities as uncertainties about the virus remain. This international pandemic is an outlier that has had and will continue to have a profound impact on everyday life for all. Like cycles in real estate, it too shall pass, and both calm and cautious optimism for the near and long term remain our outlook and wish for you and yours. Together, we shall survive and ultimately thrive.
How Does This Affect Buyers & Sellers
In the recent past, the Southern California housing market has been more favorable for sellers, however, hopeful homeowners were in for a treat when 30-year mortgage interest rates fell to just 3.29% on March 5th. Buyers that had been previously locked out of the market were certainly rejoicing with newly found buying power. With historically low-interest rates, mortgage applications overloaded lenders faster than they could keep up.
Some loan officers had never seen this volume of applications in their entire careers.
Rates at All-Time Low
The Mortgage Bankers Association revealed that compared to the week prior, new loan mortgage applications surged over 55%. Refinances were up just under 80%, and both were at their highest levels since April 2009.
Despite the fear of catching COVID-19, homebuyers haven’t backed down from taking advantage of low-interest rates.
That, however, could change at any moment as business and school closures influence actions among people across the United States.
Uncertainty in the Stock Market Driving Home Sales
The volatility of the stock market has also played a part in buyers looking to snatch up lower interest rates. With Wall Street’s roller-coaster of plunges and rallies this week, the markets finished strong Friday but were still down around 8-10% from last week.
With major stock indexes markedly higher at this end of this week, mortgage interest rates also saw a sharp increase up to 4.375% for a 30-year fixed mortgage.
Average time on the market in L.A. county is currently about 48 days, which is still considered “hot.” Realtors say they’ve had some canceled showings due to fear of coronavirus, but buyers have still been eager to make good use of lower interest rates. If the spread worsens, cancellations may become more commonplace, but hopefully fear won’t chase away potential sales.
The fate of the market and mortgage interest rates is certainly vulnerable to the state of COVID-19. The economic consequences are expected to be severe globally as reduced GDP is expected throughout the world.
How will the real estate market fare? Time will tell. It’s certainly possible interest rates could dive again, and hopefully, buyers’ confidence strengthens as the virus runs its course.
There is always opportunity during times of crisis.