Welcome To June
Its been almost 3 months since the COVID-19 had all of us locked up in our home with Shelter in Place order. One of the most common questions we get is how real estate market is doing?
You may be surprised to hear that last month in May, in our MLS, there were 15,300 homes went in escrow. You may be asking, who are these people that are buying and selling during a Pandemic?! The composition of real estate sales is actually pretty straight forward. At any given time, whether it is an upmarket, flat market, or a down market.
The decision to buy or sell are usually driven by three types of motivations: Money, Life Events, and Distress.
The one part that remains fairly constant throughout any type of market fluctuation is life events. These are people that just got married, or have a new baby and need a bigger home. People going through a divorce. People that need to downsize because they are retired or their kids moved out. People having problems getting up and down the stairs and needing a single-story home.
These are the majority of the buyers we are seeing in today’s market. In an upmarket, in addition to the people that are motivated by life events, you see more people driven by money. They can be the sellers that want to sell at the top of the market or buyers who have extra money wanting to get into real estate investing.
In a down market, in addition to driven by life events, you get to see people selling caused by financial distress. Of course, there are also other factors to consider as well. For example, a big driving force in the last couple of months has also been interest rate motivated buyers. Just a few weeks back Freddie Mac had announced that the interest rate in the US had hit an all-time low averaging at 3.28%.
What a great time to become a homeowner or move into a bigger home. A median sale price home in Los Angeles county will probably cost you around $625,000 and with a 20% down payment, you are looking at a financed amount of $500,000. At today’s rate, your payment is going to be around $2150. The same house, during their great recession of 2008, will cost you $3100 a month at a 6.35% interest rate. Now that’s more than $11,000 extra in your pocket each year. I calls it getting a raise without really getting a raise.
With the demand boosted by interest rate motivated buyers….a lot of interest rate motivated buyers and the fact that the housing supply had been at a historic low level. We had seen home value holding steady. As a matter of fact, the median sales price is at the same level as May last year. As we come out of the shelter in place, we are starting to see an increase in buyer demands and the market had shifted back into a slight seller’s market from a balanced market.
A slight seller market means that sellers do get a little bit of leverages with multiple offers but the price is staying relatively flat. Whether you are a seller or a buyer, do take advantage of the low-interest rate. You never know when they are going to bounce back up!.
If you have any questions regarding real estate, kindly call at 909-529-1989
