As the coronavirus pandemic ravages the U.S. economy and ghosts of recessions past arise, many people have one question on their mind: How will all of this affect the housing market?
The spread of the coronavirus has claimed tens of thousands of lives worldwide, forcing shelter-in-place orders throughout the country that have resulted in the loss of jobs and a record number of unemployment claims. Homeowners, renters and those in the market to buy or sell their home can expect the market to “pause,” according to local realtors, but not crash as it did in 2008.
Zillow Research recently conducted an in-depth study on housing during previous pandemics, concluding that while home sales tend to drop drastically during outbreaks, home prices stay the same or experience a slight decrease.
On Wednesday, Central Valley real estate team The Del Real Group hosted an informational webinar that pointed to much of the same here in Stanislaus County.
“We hear a lot about 2008 — is this 2008? Is this going to be a housing crash? People are freaking out,” real estate agent Daniel Del Real said. “Even though we can’t predict the future, what we can do is look at what the current state is right now and just make the best decisions with real data, because we know that it could change daily.”
According to Daniel Del Real, an oversupply in the housing market as the stock market tanked and Americans lost jobs contributed to the 2008 crash. There were 4,521 homes for sale in Stanislaus County when the housing-led crash occurred, compared to 505 listings on the market in February 2020 — the lowest amount of inventory in the county over the 16 years that such data has been recorded.
“Even though we don’t know what’s going to happen in the future right now, just looking at the inventory and what I can see in real-time data, we’re poised better right now to stomach a slowdown, or more of a stop or pause,” Daniel Del Real said.
With construction deemed essential and the development of homes moving forward during the pandemic, real estate agent Aaron West said the market is headed toward what most would consider a “normal” state, rather than the seller’s market that existed prior to the pandemic.
As a result of the uncertainty, many clients are deciding not to put their homes on the market, Daniel Del Real added. Last week, The Del Real Group anticipated placing 10 homes on the market, but only two made it on. The same is true throughout the state; last week, 81 percent of California Realtors surveyed by the California Association of Realtors reported buyers holding back on deals, a decline in listings and transactions falling apart.
Real estate agent Andy Del Real stated that sellers are currently open to placing vacant houses on the market, but those still living in their homes don’t want to put their families at risk to COVID-19 exposure by selling their home.
“For people with concerns or older people, it’s better to hold off and wait when it comes to putting your houses on the market,” Andy Del Real said.
According to West, buyers are still able to find success during the pandemic in most cases. He pointed out that only four of the 26 buyers the group is working with have stepped away due to COVID-19 concerns.
“It really just depends on people’s comfort level,” West said. “Rates are so low and they can afford the homes, as long as they haven’t run into any adversities like getting laid off or those kinds of things.
“There are steps put into place to make sure everyone is protected.”
In the last week alone, 6.6 million Americans and 880,000 Californians filed for unemployment. To protect those who may have lost their jobs but still have a mortgage to pay, Gov. Gavin Newsom announced last Wednesday a 90-day grace period for mortgage payments in California. Four of the nation’s largest banks — Wells Fargo, U.S. Bank, Citibank and JPMorgan Chase — negotiated the package with the governor’s office, along with over 200 smaller banks and credit unions. Last Friday, Newsom followed up the mortgage grace period with an expanded moratorium on evictions: a two-month delay on residential evictions for tenants who cannot pay rent due to COVID-19 concerns.
The Stanislaus County Board of Supervisors on Tuesday supported this measure, approving a resolution exercising the County’s police power to impose substantive limitations on residential and commercial (businesses consisting of 50 employees or less) evictions through May 31, 2020.
The resolution provides approximately 12 weeks of relief to tenants during the crisis to pursue assistance through unemployment, and/or other state/federal programs, or actions to stabilize family income and get back on track with rent payments. As well, property owners have the opportunity to seek mortgage relief or other assistance available through their financial institutions in response to COVID-19.
According to the County, this effort will not only alleviate stress for renters who may be affected by coronavirus, but will allow the Sheriff to allocate resources to other, more essential priorities.
Furthermore, the federal government has implemented a moratorium on foreclosures and directed mortgage servicers to offer forbearance or reduced payments on any mortgage backed by Freddie Mac, Fannie Mae, or the Federal Housing Administration (FHA).
These measures, coupled with low inventory, should contribute to a stable market for the time being.
“If somebody needs to move, if somebody needs to sell, they’re going to sell,” Daniel Del Real said. “If someone needs to buy, they’re going to buy.”