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Buyer Demand Surging and South Bay Home Market Strength

The month of June is off to a strong start in our local real estate markets.

When comparing June market data to the data from the last couple of months, the market is on fire. Even more good news is that I am starting to see numbers that are exceeding year-over-year comps, which in my opinion, is the right test for these unprecedented times.

This week I will share some data points, and action we have seen from an anecdotal perspective. As always, I will try to sum up what is going on and how to approach things happening in the market.

But first, let me share news that can be valuable.

News and Information

Mortgage Bankers Association

The Mortgage Bankers Association (M.B.A.) reported that mortgage demand spiked to an 11-year high this week. The most recent reports stated jumps week-to-week which was encouraging, but this report (and last week) have now shown year-over-year growth in a big way.

Amazingly, mortgage purchase applications were 21% higher than the same time a year ago. That is simply incredible. This is about as strong of a demand indicator as it can get.

C.A.R. Home Sales and Price Report

The California Association of Realtors (C.A.R.) released their tidy report on May home sales and prices.

From a sales perspective, single-family residential sales were worse than April, down 13.9%, and down 41.4% year-over-year.

The statewide median home price was down 3% from April, and 3.7% year-over-year.

A great stat to share is that year-to-date homes sales were down 12.9%, which is a nice holistic way of looking at the market.

From a regional perspective, home prices in Southern California were resilient and basically unchanged.

This is all old news, but C.A.R. always provides a great summary that is worth sharing. But Remember, June is shaping up to be essentially the exact opposite market, oozing with recovery strength.

Interest Rates

Interest rates continue to be at all time lows with the average 30-year fixed mortgage being inked at 3.33% on 80 percent loan-to-value (LTV) loans. Not surprising, 15-year and adjustable-rate mortgage (ARM) loans are even lower.

Unemployment

Although the unemployment rate improved from April to May and is currently sitting at 13.3%, we are still seeing incredible amounts of initial claims every week.

This week, another 1.5 million individuals filed for unemployment. This is the thirteenth straight week claims have totaled above 1 million.

Market Action & Local Pending Sales

Now, I want to dive into the action seen in our local markets.

Starting around Memorial Day, our agents started to see a strong pick-up in more affordable properties.

We have a couple of agents who work primarily in San Diego county. They were seeing little to no inventory in North County and listed a turnkey home under $500,000. Over that holiday weekend, they received more than 20 offers, driven by no inventory and all-time low interest rates.

Another agent working with entry-level buyers in Carson and Harbor City, found themselves going up against 10 plus offers on just about every home they looked at.

A week or so after Memorial Day, we began to see some of the same dynamics in the Beach Cities and Palos Verdes with a huge surge in deals being made.

When eyeballing the current pending sales data in Manhattan, Hermosa, Redondo Beach, and the Palos Verdes Hill, there has been a massive jump in deals the first half of June compared to last month’s data.

In almost all cases, the pending sales numbers are in the same realm as the busy “normal” days of Spring during April and May.

The full month data from June will be fascinating to go over to see the true strength of this bounce.

With the current state of the virus and stay-at-home trends, the desire for more space is very real. And, buyers are starting to come out in droves to find that space.

Volatility and Summing It Up

Right now, we are in about as volatile of a real estate market as we can get.

From deals collapsing for two months and then surging back to normal spring levels in June.

This is what happens amidst uncertainty as the data become more difficult to figure out thanks to historic volatility.

So, what can happen next? Well, there are arguments on both sides of the fence that are equally valid.

The Bullish Market Thesis:

The Bearish Market Thesis:

I remain boring and steadfast…(as I have stated in numerous blog posts), we need more data to understand truly where the market is going.

There are arguments to be bullish and there are arguments to be bearish, and this time more than ever, it is impossible to know which one is right.

For example, reinfection and a shut down would be devastating, but a vaccine or holding the virus at bay is a huge win.

Another example, buyer demand could be strong for months to come with low interest rates, but unemployment could catch up to the market eventually.

For buying or selling, you need to know your risk tolerance, your timeline, and fully understand what you are trying to accomplish. From there, you can decide whether it is time to make moves now or wait.

I am not one to shy away from predictions and I’ll try to give you some “educated guesses” when we have the full June data in hand.


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