Realtors: Coronavirus expected to dampen California home sales, prices and all-cash offers

California home prices and sales are likely to fall as a result of the coronavirus, but they could still eke out gains this year if lower mortgage rates offset tumbling stock prices and economic uncertainty, according to the California Association of Realtors.

The forecast comes as the real estate market enters its crucial spring selling season. The association said Wednesday that it will revise its 2020 forecast downward, “but not dramatically.” It said the situation remains fluid, but “if current economic forecasts of modest declines in GDP growth are realized, the effects of lower rates should help to offset the effects of a slower economy and increased economic uncertainty such that California would still achieve a modest improvement in both home sales and prices this year.”

The association had been expecting a 0.8% increase in single-family home sales and a 2.5% increase in the median price this year over last.

On Thursday, the association released the results of a member survey conducted March 6 to 9. Asked what impact the spreading disease would have on home prices, 45% said no impact, 40% said a negative impact and 15% said a positive impact.

As for the impact on sales, 50% said it would be negative, 36% said no impact and 13% said positive.

The email survey drew 240 responses. It ended Monday, after panic buying in Treasury bonds sent mortgage rates to record lows, but before stocks plunged into a bear market, President Trump banned most noncitizens coming from continental Europe and sports leagues halted their seasons.

Kalena Masching, a Redfin agent in Silicon Valley, saw a sudden shift in the market this week.

“Last week, everything was going very quickly with 10 to 20 offers,” she said. Demand “was really hot due to interest rates and low inventory.”

Last Thursday, on March 5, she listed a home for sale in Mountain View. On Sunday, her client got three strong offers, all over asking price with no contingencies. On Monday, after the Dow Jones industrial average lost nearly 2,000 points, two buyers withdrew their offers. The sellers accepted the third offer, which was all cash. On Thursday, that buyer withdrew and stands to lose the earnest-money deposit, Masching said.

The homeowners have already moved out and are renting a place, which they can do for a few months to see if the market settles down, but not all sellers can afford two homes at once, she said.

Masching said many of her buyers who were planning to make offers last week have pulled back. Most are using stock to fund the down payment “and don’t have the purchasing power they had two weeks ago.”

She added that some sellers who are still living in their homes won’t allow open houses and showings because of coronavirus fears.

Realtors expect homes will take longer to sell as a result of the pandemic — 49% of those surveyed expect the average days on market will increase, compared with 12% who said it will decrease and 38% who expect no change.

D.J. Grubb, owner of the Grubb Co. in Oakland, said homes will take longer to sell because more buyers will get a mortgage instead of paying all cash.

“Up until now, 38% of my sales have been all-cash. I think we are going to see people taking on debt because they don’t want to touch their (stock) portfolios” while prices are down. That will delay closing from 15 to 20 days on average out to 30 to 45 days.

The average rate on a 30-year fixed-rate mortgage dropped to an all-time low of 3.29% last week, according to Freddie Mac. The rate rose this week, to 3.36% “as refinance applications continue to surge and lenders work to manage capacity,” Freddie Mac said Thursday.

Grubb said his company’s open houses were extremely busy last weekend.

One of his agents listed a house in Oakland for $1.05 million and went into escrow Thursday at $1.43 million. That said, “we only got three offers. We typically get five or six.”

Are you looking to buy or sell a house in the Bay Area? I’d love to hear what you’re thinking now. Email me at kpender@sfchronicle.com

Kathleen Pender is a San Francisco Chronicle columnist. Twitter: @kathpender

Article source: https://www.sfchronicle.com/business/networth/article/Realtors-Coronavirus-expected-to-dampen-15126871.php

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