As I write this, a month into the SIP (Shelter in Place) it appears that our efforts in the East Bay Area are finally starting to pay off. This has been harrowing, profound and to say the least, inspiring of deep retrospection. The irony of my role as the conduit by which people buy shelter or sell that shelter has not been lost on me. I have felt somehow that my job is more critical than I ever knew it to be.
I have heard the anxiety in my client’s voices as they decide whether to make an offer during this crisis or wait until it becomes a buyer’s market (and will it?). I have felt the fear while counseling a seller as to whether they should come on the market now or later, all the while updating them daily on the changes in county and state rules dictating whether we can allow stagers, photographers, painters, and ultimately buyers to enter homes. And I have known that there is nothing we can take for granted anymore. What used to be almost an afterthought – scheduling a mover, purchasing boxes and packing tape, finding a new home in another state by jumping on a plane last minute – all of these feel like luxuries in the time of SIP.
During these all-consuming events much falls away – everything that isn’t essential becomes irrelevant. What matters is carved out in stark relief and we are forced into the proverbial here and now.
And then, of course, we begin to hope. To hope is only human and it is a sign of recovery. I am witnessing the hope as we continue to bring new homes onto the market and help clients write winning offers on homes. I witness the relief as the loans go through and the signing appointments are booked. Movers are working. So are plumbers and certain construction projects are moving ahead.
We do not know what the future holds, we can only analyze the data we have one day after it comes in. As I look ahead to April I do know that the health of the economy remains to be seen. But by all accounts, there is a substantial number of sellers wanting to sell and many buyers wanting to buy. Once the greatest danger has passed, I believe that the sale and purchase of real estate will be one of the things that bring the economy back. And that makes sense – home has never been more important or more relevant in our lives as it has been recently.
Here is what we are seeing in terms of housing inventory and the market in general
As we figure out how to prepare homes and show homes safely (and we are now doing that) the much-anticipated Spring Inventory will continue to come on the market.
Many agents are now presenting their listings at a Transparent Price – this means that the sellers are comfortable accepting an offer at that price. That does not mean that buyers will not gather nor that the home will not go higher but it does mean that if you are ready and move quickly (and with a great agent you can do this comfortably) that you can be the first and only offer at a known price.
If the market is “about to tank” then you may be worried to offer at a transparent price – please reach out to me, we can really dig into this question over the phone in more detail.
And that begs the question, is ourmarket about to take a nosedive? Maybe. We do expect a real economic downturn but it may not affect our tiny real estate world (i.e., the East Bay) in the same way it affects the nation as a whole or even most of California. This is because the buyers in our region are already very unique and really do not reflect the average consumer. Most of the buyers in our area have salaried positions and are much less likely to lose their jobs. In addition, most buyers in our area are very well qualified and can withstand the more strenuous preapproval process the lenders now require.
That doesn’t mean that prices won’t drop, they likely will and are somewhat already. But, and this is really important, if supply does not meet demand, prices will stay higher than average and there will be competition to drive the prices up over time. Remember that we have had a shortage of housing for many years. We had very little inventory this first quarter (30% below last year) and the buyers were piling up, waiting for Spring. And now, although there certainly are fewer buyers out there there are also fewer sellers so I do not see the need for housing being sated any time soon.
That said, I do strongly suspect we will see the days of 30-50% over list price wane but I do not believe there will be such a massive drop in prices that it is worth waiting if – and again, really important info coming – if you plan to stay in your home for at least 7 years and you want to move. In other words, do you want to buy a home, do you yearn to paint, and decorate and cook in your own place, a home you can love and appreciate and care for, a home you can have children run around in and plant a fruit tree and harvest that fruit? If so, then you should buy now. I have found that too much focus on “deals” ends up clouding the real purpose of the task which is to purchase a home that you build equity in slowly over time, by your sweat equity and by your love and devotion to that home.
Here is what we know now about LOANS right now
Jumbo interest rates are about 1% higher than they were prior to the pandemic ($726,525). Low balance (under $510,400) conforming loans rates are again near record lows, about 1/2% lower than they were in JanuaryHigh balance conforming loans ($510,400-$765,600) interest rates remain about 5/8% higher than the low balance rates.umbo financing remains available for qualified buyers, but rates are much higher and turn-times are much slower.
Rates are higher b/c of extra risk, excess demand, too little capacity, and too few competitors (now that Wells Fargo and many mortgage banks have pulled out of the market).Jumbo loans require higher credit scores now (in the 700s), at least 20% down in most cases, and ample reserves (as much as 12 months of PITI in many cases).
Jumbo financing is much more difficult for refinancing home-owners (as opposed to buyers), as many lenders are simply refusing to do jumbo refis now and others are limiting refis to only exceptionally strong borrowers.
The jumbo market will very likely spring back to life once the COVID-19 crisis ebbs.
When it does, rates will likely plummet, enabling current jumbo borrowers to refinance into lower rates at no cost.For FHA and VA loans, credit scores need to be above 640 now (in most cases) and debt ratios need to be under 48 now in most cases (as opposed to as high as 56.99 previously).
Reserve requirements are much less stringent for conforming and FHA borrowers and have not changed significantly; weaker borrowers might be required to have only a month of reserves, for example, while many borrowers still require none.
If you made it this far, congrats! Imagine writing all this – well actually, I love writing these emails. I imagine my lovely clients reading and learning and thinking and hopefully, as always, knowing they can call me any time, really and truly, to ask me for advice, help or input. I am here for you.