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August 12, 2020

The demand side of the housing market in California remains robust. Buyers are hungry for a home that suits their new needs. Workers have greater flexibility to find take advantage of that preference with increase work from home. And families are enjoying a boost to affordability due to interest rates that have fallen to all-time lows. However, a lack of supply is also putting upward pressure on home prices and crimping the ability of pending and closed transactions to grow as much as they should.

Weekly Member Survey: In our weekly survey of California REALTORS®, there was a 4.3% increase in the percentage of members that listed a property. The percentage of California REALTORS® entering escrow last week was also up by 12.7% last week. Encouragingly, members were also more optimistic about the future last week as the percentage that expected both sales and prices to rise increased by 6.5% and 2.1%, respectively.

Mortgage Rates Dip to All-Time Low Fueling Buyer Demand: Freddie Mac’s average 30-year fixed-rate mortgage dipped to a new low last week when it reached 2.88%. One mortgage wholesaler even announced a 30-year mortgage under 2%. New mortgage purchase applications remain more than 20% above last year’s levels, and even though the weekly applications data is slowing, the seasonal pattern suggests that activity should be slowing more than it actually is.

Labor Market Remains Challenge for Housing Even As Unemployment Falls: New and continuing claims for unemployment insurance declined in California over the past two weeks, but remain stubbornly high. Nearly 2.8 million workers were still collecting unemployment in the state at the end of July and more than 220,000 file new unemployment claims last week. The national jobs number slowed significantly from 4.8 million jobs created in June to just 1.8 million last month.

Delinquencies Rising in California: CoreLogic released its Loan Performance report this week and it showed that both early and late-stage mortgage delinquencies began to rise in most parts of the U.S. during May. Although California did not make the list of the top 10 states in terms of delinquencies, and several of our larger metros are faring better than other parts of the nation, every one of California’s metropolitan areas covered by the report saw an uptick in delinquency except Chico.

Slower Growth Ahead Based on Weekly MLS Data: There were fewer closed transactions last week, the average number of sales dipping by 25% from the previous week (likely due to fewer homes entering escrow during the 4th of July holiday one month prior). However, the pace of pending sales has also been flagging with the latest weekly numbers on homes entering escrow down by 1.7%. The largest decline was in the San Francisco Bay Area, which saw pendings dip by 7.5% last week, but every major region saw some retrenchment in new escrows being opened last week.

Some Signs of Slowing in REALTOR® Attitudes Last Week: California REALTORS® were more optimistic last week and saw an increase in listings and escrows. However, they also reported an 18.1% decline in closed transactions last week (consistent with the MLS data), and more troubling is that the percentage of REALTORS® that expect an increase in new listings was flat from the week earlier.

There are many positive signs of ongoing progress in the weekly data on California’s economy and housing market. In addition, REALTORS® remain optimistic about the trajectory going forward. However, unemployment remains high and a lack of homes available for sale will mean that many buyers that want to take advantage of their new flexibility and historically low interest rates will face stiff competition. In addition, the ripple effects from forbearance and job loss are still rolling in and California has held up well thus far, but more impacts are expected in the coming months. Cautious optimism remains the recommended approach.

 

Past Market Minutes
August 5, 2020 - market data improved, labor market began to suffer
July 29, 2020 - Signs of optimism, but fundamental indicators moving in the wrong direction
July 23, 2020 - CA housing market recovers significant lost ground in June, unemployment falls
July 16, 2020 - Housing demand remains robust, but Governor closes many parts of CA again




 

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