A lot sure has happened during the first 6 months of 2020 globally and the Coronavirus Pandemic changed how we live our life on a daily basis. There was a lot of fear, loss, and uncertainty. Many lives were put on hold. As a real estate professional, it is my job to help my clients to whether the ups and downs of the real estate market – to share the exciting news of an appreciating market and to have a difficult conversation on a depreciating market. So how has the coronavirus affected the real estate market? This is the most frequently asked questions I have received since April.
To your surprise, the short answer is, not much. We saw essential no change int he median sale price in May of 2020 compare to May of 2019. We close out the first half of 2020 with a 2.7% increase in median sales price compare to June of last year.
Am I surprised? Yes and No. If you heard me talk before, you probably would hear me say that the real estate is all about supply and demand.
Did the Coronavirus and all these uncertainties cause people to have second thoughts about buying a home? Most definitely, we saw just about 20,000 less homes being sold this 2nd Quarter compare to the 2nd Quarter of last year and that is about a 29% drop in the demand!
At the same time, the uncertainty has affected the sellers more than buyers. We saw a 34% decrease in the supply between April to June of this year compare to last year. That is about 79,000 less homes being put on the market.
So essentially the drop in demand is not keeping up with the drop in supply. Thus continuing to keep the inventory tight and the price stabilized.
Now the logical question is why is the drop is demanded still slower than the drop in supply during a time of uncertainty. Why are people still buying homes?
Many reasons contribute to that but the #1 reason is – the interest rate. The pandemic and the uncertainty also caused the interest rate to drop to and remained at a historic low level. It is not uncommon now to hear people getting mortgage interest rates below 3% now compare to near 5% at the end of 2018.
What does that percentage mean in Lehman’s term? Say you are borrowing $500,000 with the interest rate at 5%, your monthly payment would be just short of 2700. In today’s rate, that same mortgage will only cost you, 2100! That’s 20% off. Can you imaging owning the same home for 20% less? I would probably buy a large purchase with a 20% discount let along with a house!
If you know this, it is not surprising to see the home prices remain relatively stable. Now the more important question is…..where will the market take us in the 2nd half of 2020?
Well, to find you will have to subscribe to my Youtube Channel or Facebook Page if you have not already done so. I will be completing the second part of this State of the Real Estate Market – 2020 in another video.
If you have any questions regarding real estate, kindly call at 909-529-1989
