As we continue to wait for full April data to shine a light on Coronavirus’ impact on our local real estate markets, I am sharing weekly real estate big-data that is useful.
Important News This Week
- According to Black Knight, a mortgage data and analytics firm, about 3.4 million borrowers are in forbearance. That represents about 6.4% of all mortgages outstanding.
- The Labor Department has now reported new unemployment filings over the past five weeks that have totaled more than 26 million.
- The Mortgage Bankers Association reported that California mortgage purchase applications are down over 40% compared to the same time last year.
- After I shared huge pending sales drops in the South Bay through the month of March compared to last year (i.e Redondo Beach down almost 80%), the numbers are getting better. They are still not great, but they do not look to be quite as bad as March’s numbers.
- In a weekly survey, 74% of agents said their clients have not reduced listing prices to attract buyers according to the National Association of Realtors (NAR).
- Congress passed a new $484 billion coronavirus relief bill of which $320 billion is intended for the Paycheck Protection Program to help small businesses.
Ugly News Comments
The ugly news is still very ugly.
It is a bit shocking that after what may only be one month of a job loss or no revenue for some individuals, that such a significant portion of mortgagees cannot pay just one month of a mortgage payment. These are not renters we are talking about, but homeowners who are supposed to be the strongest financially to weather tougher financial times.
My hope is that individuals with mortgages are using forbearance as an opportunity to conserve cash against worst case scenarios. And of course, I understand businesses like restaurants and gyms might be going negative if they continue to pay rent and staff, which is far worse than a paycheck going to zero.
Unemployment is still very bad. There were 8.8 million jobs lost during the entirety of the Great Recession. How many of the 26 million current losses are temporary? How many claims are from independent contractors? And, how many jobs have been saved thanks to the Paycheck Protection Program (PPP)?
Lastly, the MBA reports help measure demand. It is very easy to measure supply based on current listings, but this 40% drop in purchase applications shows how badly demand has been destroyed in our state.
Better News Comments
The better news offers small rays of positivity.
As April comes to an end, I am looking forward to seeing our local market home data compared to last year. In some light research, things don’t look to be as bad as they did in March. I don’t want to mislead you that things are good, but it looks like pending sales data could be “less bad.”
A bright spot is that if 74% of agent’s have their sellers holding firm, then that will help support market prices. I have seen this show before and based on how the Great Recession played out, there is only so long some owners can wait before cutting prices.
Last but not least, I hope the additional PPP funds are effective. If this can save jobs and keep businesses afloat, that means money for mortgage payments and rent, which in turn, helps to support the real estate market.
Deals to Highlight
There are two properties that I want to highlight as we head into a very fluid, quickly shifting real estate market.
Manhattan Beach Deal
Let’s start with a past blog post I wrote on March 20th titled, “Smart Loan Protection & Big Test for the Manhattan Beach Market.”
In the last section of this blog, I covered a new listing, 116 16th Street, that I thought would be important to the Manhattan Beach market. Take a look at that post to see why I believe that land sale was so important and served as an indicator of market strength.
As mentioned, 116 16th Street was a land sale at an asking price that would make it one of the lowest sales seen since 2013 (not on Highland). If it did not sell, then that would be problematic for the market.
The listing debuted on March 17th, Governor Newsom’s stay-at-home order was issued on March 19th, and the listing found a buyer on March 27th.
And, good news…It closed earlier this month for $125,000 over asking at a final price of $4.625 million.
That is the exact same price a developer paid for 212 16th Street that sold back in 2016.
You need to dive deeper to read the tea leaves, but this “test” resulted in a passing grade for Manhattan Beach real estate.
If it had sat on the market for a while and sold for lower than asking, then it could have been a really horrible comp for the market.
But again, Manhattan Beach passed this test and we should all be happy from the result.
Rancho Palos Verdes Deal
A new listing, 3414 Deluna Drive, in Rancho Palos Verdes’ neighborhood of Mira Catalina started on the MLS on April 14th asking $1.289 million.
This was a very clean home that was move-in ready sporting big views. After a short time on market, they received multiple offers and are currently in escrow over-asking.
Why such huge demand?
The explanation can be found in the sale of 3348 Corinna Drive just a block away.
This home is the same tract home built in the 1960s with essentially an identical floor plan and views. The difference here, however, was that it was a fixer. With old bathrooms, stains on the carpets, and a leaky roof, this home needed some major TLC.
Even with all the work needed on Corinna, early 2019 was a different time. It ended up selling for $1.34 million. So, that is the comp that drove the bidding war on Deluna which was asking $51,000 less.
If you look at Deluna and its condition being far superior to Corinna, you have to ask yourself that if this one sells somewhere around the same price as the Corinna sale, doesn’t that reset the market down?
Maybe. However, just one sale doesn’t always reset the market but this is one of the new pandemic developments that needs to be watched closely as our market starts to perform during this health crisis.
If a very nice, clean, and livable home sells for the same price or below a fixer comp last year, then that could be a sign of some price weakness in the market. Certainly, it will have an effect on Mira Catalina sub-market..
The Manhattan Beach and Mira Catalina listings are both trust sales with beneficiaries who are inheriting assets and are happy to liquidate property quickly. Those liquidations get done fast and by listing at prices that are very intriguing relative to past sales.
If we have a V-shaped recovery, you can expect listings like these to stop fairly quickly, but if the sluggish market continues, this unfortunately, could become a trend…